Introduction
Data Integrity
Every spreadsheet lends itself to errors. Version control is always an issue, files can be corrupted and laptops can get misplaced.
If you overwrite a formula what impact does this have on the rest of your file? Its so easy to run test scenarios on your offline cap table and then forget to edit or remove the proposed investment when the raise is finalised. Approximately 30% of the companies we onboard have lines on their cap table representing an investment that never took place or inaccurate figures and dates for an investment that did!
Our Scenario modeling tool allows you to simulate the impact of a future investment without the need to alter your existing cap table.
Complexity of scale
More and more we’re seeing start-ups rapidly expand. As your business scales and you start introducing convertibles and equity plans the complexity of your cap table increases which can make managing it on excel extremely difficult.
Equity compensation is becoming the norm! Recently incorporated companies are suddenly looking at hundreds of outstanding grants as their business rapidly expands. At all times you need to keep on top of: the vesting schedules applied to employee grants, know whether vested shares have been exercised or released and moved across to the relevant line on the cap table.
Errors we commonly see when companies try to manage this process offline:
- Duplicated grants
- Double counting when a grant is exercised and the outstanding or available for grant is not adjusted accordingly.
- Incorrectly tracking forfeited and expired shares
- Employees exercising more awards than have vested
- Exceeding the number of shares available in the plan pool
Tracking Convertibles
How do you track the impact of a future conversion on your cap table? If these notes convert, do you know how much you're going to be left with?
The number of shares a note converts to is a constantly changing figure depending on interest rates, valuation caps and discount codes. If these are not continuously accounted for you are losing track of your potential equity stake!
Our Scenario modeling tool allows you to simulate the impact of a note conversion in line with a new funding round ensuring that at all times you are aware of any future dillution.
Multiple versions and no single source of truth
Version control is one of the biggest issues we see. The responsibility of managing the cap table often moves around from person to person within an organisation especially as it grows. It might start with the founder, move to the CFO as the company expands and numerous people after that! What you can end up with is multiple versions of the cap table being passed around and no one knows which version is definitive or if any one version contains all updates at any given time. In addition, its very likely your legal team is holding yet another version of your company cap table. Everyone has their own way of managing a cap table on excel, from excel wizards to those who like to keep a more streamlined version and combining the two doesn't usually
What we really want to highlight is the unnecessary stress this can cause down the road. Working from an incorrect or outdated cap table will ultimately lead to a huge time and effort resource down the road when you have to sieve through years of historical documents trying to locate accurate figures.
In isolation none of these issues may seem overly problematic but together they can create a huge headache and a lot of unnecessary time can go into fixing them up.
Using Cap table management software like the growth platform provides better capabilities and version control than ever your offline spreadsheet and will help you avoid all these common pitfalls in managing the your cap table and equity plans on excel.