cap table management
The ongoing process of tracking and updating a company's ownership structure, including equity grants, option exercises, conversions, and new funding rounds.
Example
“As the startup went through three funding rounds, cap table management became critical to tracking dilution and option pool size.”
Memory Tip
CAP TABLE MANAGEMENT = keeping the ownership spreadsheet accurate. Critical as companies grow.
Why It Matters
Understanding cap table management helps you know exactly what percentage of a company you own if you receive equity compensation or invest in a startup. This knowledge directly impacts your net worth calculation and informs decisions about whether to accept stock options or invest in a particular company.
Common Misconception
Many people think that receiving stock options means they immediately own that percentage of the company. In reality, options must be exercised and may be subject to vesting schedules, meaning you do not actually own the shares until you pay the exercise price and the options have vested over time.
In Practice
A software startup grants an employee 10,000 stock options with a four-year vesting schedule and a one-dollar exercise price. After two years, the employee has vested 5,000 options worth approximately 50,000 dollars based on the current valuation, but they must pay 5,000 dollars to exercise those options and actually own the shares on the cap table.
Etymology
CAPITALIZATION TABLE MANAGEMENT. Managing the document showing who owns what in a company.
Common Misspellings
Small business accounting made simple
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