Cap Table Modeling Template

Key takeaways

• Every new share issued dilutes existing owners; the founder's percentage only goes one direction across rounds.
• Option pools are created before a round and dilute founders, not just investors, which is a common surprise.
• What matters at exit is the value of your shrinking percentage, not the percentage itself.
• Liquidation preferences decide who gets paid first, so a high valuation with harsh preferences can be worse than a lower, cleaner deal.

The mechanics nobody explains slowly

A cap table is just a list: who owns how many shares, of what kind, and therefore what percentage of the company. Dilution is what happens when the company issues new shares. Everyone's existing shares stay the same, but the pie now has more slices, so each existing slice is a smaller percentage.

A round works like this. The company and investor agree on a pre-money valuation, meaning what the company is worth before the new cash. The investment is added to get post-money. The investor's ownership is simply their money divided by post-money. Work the classic made-up example: an $8 million pre-money valuation plus a $2 million investment equals $10 million post-money; the investor owns 2 ÷ 10 = 20%, and every existing holder's percentage shrinks by exactly that factor, so a founder at 60% becomes 48%.

Nothing was taken from anyone: the founder owns a smaller share of a (theoretically) more valuable company. Whether that trade was good is the entire game, and you can only judge it by modeling it, which is what a cap table template is for.

The option pool trick

Here is the mechanic that surprises almost every first-time founder. Investors typically require an employee option pool, often 10–15% of the post-money company, to exist before they invest, carved out of the pre-money. Read that again: the pool is created from the existing owners' equity, not shared proportionally with the incoming investor.

The effect is that the true price of the round is lower than the headline. If an investor offers $8 million pre-money but requires a 10% post-money pool, the founders absorb both the investor's 20% and the entire pool. The "effective pre-money," meaning what the founders' existing company was actually valued at, is meaningfully below eight. Two term sheets with identical headline valuations and different pool requirements are different prices, and the difference is real money at exit.

The countermoves are knowable: negotiate the pool size against a bottom-up hiring plan (pools sized by formula are habitually oversized), question whether an existing unused pool can count toward the requirement, and always compare offers on effective pre-money. None of this is adversarial. It is simply reading the price tag correctly.

Modeling across rounds: the compounding effect

One round is arithmetic; a company's life is compounding. A founder who starts at 100% might, plausibly: split with a co-founder (50%), carve a 10% pool and sell 20% in a seed round (roughly 36%), refresh the pool and sell 20% in a Series A (high twenties), and again in a Series B (low twenties). Nothing went wrong in that story, which is the normal path, but founders who never modeled it are shocked to meet their own number.

This is why the template models rounds in sequence, not in isolation. Each round takes: new pool shares (from existing holders), then investor shares (from everyone). Watching your row across five columns teaches the two real lessons. First, early equity decisions echo loudest: a casual 5% to an early advisor costs multiples of that in exit dollars after the dilution cascade. Second, the only justification for dilution is that each round should make the whole pie grow faster than your slice shrinks. A smaller share of something much bigger is the good outcome; a smaller share of the same thing is just loss.

SAFEs and convertible notes complicate the picture by deferring the price: they convert at the next round, often at a cap or discount, which means their dilution lands later and all at once. Founders who stack several SAFEs without modeling the conversion regularly discover at the Series A that they sold more of the company than they thought.

Preferences: why percentage is not payout

The cap table tells you who owns what; the term sheet tells you who gets paid in what order, and at exit the order can matter more than the ownership.

Investors typically hold preferred stock with a liquidation preference, commonly the right to get their money back (1×) before common shareholders see anything, either instead of their percentage (non-participating) or, in harsher terms, in addition to it (participating). Model a sober scenario: a company raised $15 million total and sells for $20 million. With standard 1× non-participating preferences, the first $15 million repays investors; the remaining $5 million is what common shareholders divide, founders and employees alike, regardless of the percentages on the cap table. The founder who "owned 30%" of a $20 million exit does not take home $6 million.

This is why sophisticated founders evaluate offers as valuation and terms together: a lower valuation with clean 1× non-participating preferences can beat a flattered valuation carrying participating preferred or multiple-X preferences. The template's exit-waterfall tab exists precisely for this: pick several exit values and see the actual dollars to each row. Standard reference terms live in the NVCA's public model documents, worth reading before the first term sheet, not after.

Running your own model

Build the simplest version that tells the truth. Columns are events: founding, advisor grants, pool creation, each round, exit. Rows are holders: each founder, the pool, each investor class. For every event record shares issued, then recompute everyone's percentage; on the final column, run the waterfall (preferences first, then the remainder by ownership) at three or four exit values from disappointing to wonderful.

Use it before decisions, not after: before splitting with a co-founder (vesting schedules for everyone, including you, are the cheapest insurance in startups), before promising advisor equity, before signing a term sheet, before stacking one more SAFE. Ten minutes in the model converts "this feels fair" into "this costs $1.8 million at a $30 million exit," which is a much better basis for a negotiation.

And keep the actual records clean: signed grants, filed paperwork, one authoritative ledger. Cap-table archaeology during a financing or acquisition is expensive, embarrassing, and entirely preventable. General education, not legal advice: real rounds deserve a real startup attorney.

Put it to work

Model your cap table round by round before you sign anything: pool carve-outs, each raise's dilution, and an exit waterfall with preferences at several sale prices. Compare term sheets on effective pre-money and terms, not headline valuation. The dilution calculator below runs the core math; NVCA model documents show standard terms. General education, not legal advice.

Sources & references

Linked entries open the named source directly. Entries without a link say exactly what kind of reference they are — and how to check them yourself.

• National Venture Capital Association — model legal documents