Capitalization Table

A capitalization table — universally called a cap table — is the authoritative ledger of who owns what in a private company. It lists founders, employees with stock options, angel investors, venture or private equity funds, and any other equity holders, along with the type of shares each holds (common, preferred, warrants, and so on). Because different share classes carry different economic and voting rights, the cap table tells a much richer story than a simple ownership percentage.

Dilution is central to reading a cap table correctly. Dilution occurs when new shares are issued — through a funding round, an employee option pool, or a convertible note converting to equity — reducing each existing owner's percentage of the total. A family that invested early at a large percentage may own a meaningfully smaller slice by the time a company reaches a later stage, even if the value of their stake has grown.

For families engaged in direct investing or co-investments, reviewing the cap table is a routine part of due diligence. Consider a founder who sold her logistics company and reinvested proceeds into a Series B technology startup. Before wiring funds, her family office team examines the cap table to understand the liquidation stack — the order in which investors get paid when a company is sold or wound down — because preferred shareholders often receive their money back before common shareholders see anything.

A common confusion is treating cap table ownership as equivalent to economic outcome. Liquidation preferences, participation rights, and anti-dilution provisions can all mean that a stated ownership percentage translates into a very different share of actual proceeds at exit. Families working with private equity managers or evaluating direct deals typically rely on qualified legal and financial advisors to model these scenarios before committing capital.