TL;DR: If you’re the a founder of a new startup, it’s simple to use Excel to create your first capitalization table, calculate outstanding and fully diluted ownership, and create an option pool (stock plan) based on a target percentage using Tables, circular calculations and Goal Seek.
Download the open-source cap table and the example spreadsheet.
Simple cap table
Let’s say you’re George Bluth, the founder of Bluth Frozen Banana Technologies, Inc., a Delaware corporation that has developed a hot new frozen-banana delivery app with an animated AI chatbot that takes orders while impersonating David Cross and stores transaction information on the blockchain. The board issues shares of common stock to your co-founding team in proportion to what you each bring to the table, as follows:
This simple cap table should show the number and class (common) of shares held by each holder, plus the percentage of the company held by each holder. The share numbers can be hard-coded and then summed via formula, and the percentage can be found by dividing the number held by each holder by the total number of shares outstanding, as shown in the example spreadsheet. (Or use Excel’s Tables feature for more readability, as described below.)
On this cap table, the percentage outstanding is useful for determining (a) what percentage of exit proceeds would be received by each holder if the company were purchased today, (b) what percentage of a fixed dividend would be received by each holder if the board declared a dividend today, and (c) who controls the voting power with respect to corporate matters subject to stockholder vote. By default under Delaware corporate law, each share of capital stock (meaning any type of stock, common or preferred) receives one vote (DGCL 212(a)). Common actions requiring majority stockholder approval include the election of directors, the sale of the company, and amending the certificate of incorporation. So it’s clear from the cap table that George and Lucille together control the election of directors and could approve a sale (or George and Michael and GOB, and so on).
This isn’t necessary if you just need a quick illustration of who controls the stockholder vote, but one feature of Excel that helps tables become easier to put together and, later, to read, is to turn data into capital-T Tables. To do this, select the area where your data is or will be (but don’t include a “total” row if you added one) and press ctrl+T. That will turn your data into a nicer-looking table with banded rows and lots of new helpful tools. For cap tables, I usually go to the Table Design tab at the top, uncheck “Filter Button,” and check “Total Row.” In the added Total Row, you can use the pulldown menu to access a variety of functions, including summing. After you hard-code names, share classes and share numbers in your table, you can use almost human-readable formulas to calculate percentage ownership, as shown in the example spreadsheet. If the table’s colors look weird, select the whole table and ensure the fill color is set to “No Fill.”
You don’t need to remember the syntax with brackets and symbols – just click the cell within the table that you want to reference while you’re creating your formula and Excel will do it for you. If you create or edit a formula in one cell, Excel will (sometimes incorrectly) assume you want the same in all other rows within the column. To undo this, press ctrl after the auto-fill and choose the appropriate menu option.
Using Tables may seem like a couple of extra steps, and their behavior takes some getting used to, but when your cap tables become much more complex and eventually form the basis of exit waterfalls, they can be a lifesaver (or at least a headache saver). It’s also easier to add and delete rows and columns as your company grows and you need your cap tables to have more functionality.
Adding an option pool
Bluth Frozen Banana Technologies, Inc. is catching on, but it’s time to add sales and engineering teams, and for a cash-strapped startup, that means option grants. You read online somewhere that a 10% option pool is a good idea to start with, so you want to see what that looks like given your hiring needs. George Michael has negotiated 2% of the company on a fully diluted basis, Maeby 1%, and T-Bone 0.1%. (Buster had a panic attack and missed the interview.) How much do you want left over in the pool, and what does it look like in terms of share numbers?
To figure it out, add a few new columns to your cap table (highlighted in green), rows for your new hires and a row for “Unallocated shares (Plan)” (reserved under the plan but not yet issued) and a couple of boxes below:
The formulas to be set up are in the example spreadsheet. Be sure iterative calculations are turned on, by going to the File ribbon > Options > Formulas > check the box beside “Enable iterative calculations.” For a typical cap table, Maximum Iterations should be set to at least 10,000, and Maximum Change should be 0.00001 or less. Precision is important, but excessively high or low numbers, respectively, can slow Excel down or cause it to crash.
To see what a 10% pool looks like, use Goal Seek. Click the % Fully Diluted cell below the cap table, then go to the Data ribbon > What-If Analysis > Goal Seek. Set the value of the % Fully Diluted cell (e.g., C32) to 10% or 0.1 by changing the Total Plan Size cell (e.g., C31). As expected, this yields a pool size of 33,333 shares ((33,333 / (300,000 + 33,333) = 10.00%). I’m not aware of a way to round numbers directly through Goal Seek, so once you have your number, you can manually round it to avoid fractional shares by typing the number or copying and pasting values only. (Most company charters prohibit fractional shares.)
Once you have the overall equity pool size, you can use the box in the lower right to calculate the share numbers for the new employees. The orange box is the input (percentage), and the output directly below is the number of shares. Below is the final cap table:
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