What is a cap table?
A capitalization table, or cap table, is a document that outlines a company's ownership structure by showing who owns its shares and what percentage each shareholder holds. It is used to track equity ownership among founders, investors and employees who hold shares or stock options.
At incorporation a cap table may have just two lines. With every funding round, new partner or employee incentive scheme it grows, and it becomes a core reference in any negotiation or transaction.
A cap table typically includes:
- Shareholders' names: founders, investors, employees and any other equity holders.
- Number of shares each party owns, and the share class where there is more than one (e.g. ordinary or preferred).
- Each shareholder's ownership percentage.
- Current and previous funding rounds, including the valuation and share price in each.
- Potential future ownership changes, such as employee options and convertible instruments.
How ownership is calculated
Ownership % = (shareholder's shares ÷ total shares outstanding) × 100.
When new shares are issued to an investor, existing holders' percentages fall proportionally. This is called dilution, and it can be estimated as: New % = Old % × (1 − new investor's %). The investor's stake itself is usually the amount invested divided by the post-money valuation.
Example: the impact of a new investor
Example: a company is founded by two partners, Founder A with 60% and Founder B with 40%. After an investor acquires 20% of the company through newly issued shares, the cap table becomes:
- Founder A: 60% × 0.8 = 48%
- Founder B: 40% × 0.8 = 32%
- Investor: 20%
In share terms: if the company had 1,000,000 shares (600,000 for A and 400,000 for B), it issues 250,000 new shares to the investor, taking the total to 1,250,000. Founder A now owns 600,000 ÷ 1,250,000 = 48%, Founder B 32% and the investor 20%. The founders hold the same number of shares as before; their percentage is smaller, but the value of their stake may rise thanks to the fresh capital.
Why it matters
- Provides transparency on the ownership structure for all parties.
- Helps investors evaluate the company and understand who controls decisions.
- Supports planning and execution of future fundraising.
- Shows the impact of new investment on existing shareholders.
- Is among the first documents requested in due diligence for a sale or acquisition.
Common mistakes to avoid
- Failing to update the table after every change, creating conflicts with official registers.
- Ignoring employee options or convertible instruments when calculating fully diluted ownership.
- Negotiating a percentage without understanding its effect on control, voting rights and exit terms.
- Granting early equity without clear agreements or vesting schedules.
How Marsad can help
When you are raising capital, selling a stake or pursuing an acquisition, Marsad Commercial Brokerage acts as an independent intermediary to help you understand how each offer would change your ownership structure before you sign. We support valuation and negotiation of stakes and terms, and help organise the governance and compliance information investors typically request. Our services complement, and do not replace, specialist legal advice when drafting agreements.
Book a confidential consultation with Marsad at info@marsad.qa or +974 5080 0666.
