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How to Read a Cap Table: Who Really Owns a Startup

Beginner Investing • 6 min

What this lesson is about

One spreadsheet shows exactly who owns what percent of a startup. Founders, employees, and every investor from seed to Series C.

2 parts · a quick check after each · then the quiz

Part 1 of 2

An early Amazon employee in the 1990s had stock options that seemed worthless when the stock plummeted 80% during the dot-com bust. Those who held on became millionaires. A capitalization table, or cap table, is just a spreadsheet that lists everyone who owns a piece of the company. This includes founders, employees with stock options, and every investor from seed stage to Series C and beyond. It shows exactly what percentage each person owns.

Founders usually don't keep the same percentage they started with once the company finds success. Every new funding round means new shares are issued to investors, shrinking everyone else's stake. This process is called dilution, and it's completely normal.

DilutionA smaller slice of a much larger pie. That is the bet.

Quick check

What does 'cap table' stand for, and what does it track?

Part 2 of 2

Insider Angle: Venture investors often negotiate a "liquidation preference." This gives them the right to get their money back first, before common shareholders, including most employees, if the company gets sold. A startup might sell for a big number in the news, but employees holding common stock often walk away with much less than their supposed ownership percentage would suggest.
Try This: If a startup raised $50M over three rounds, each with a standard 1x liquidation preference, and then sold for $80M, calculate how much goes to preferred investors first. Look at the difference between the headline valuation and what employees actually receive.

Quick check

A founder owns 40% of their startup at founding. After raising a Series A round that issues new shares to investors, the founder's percentage ownership typically goes down even though they didn't sell anything. What's this called?

Quiz

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