Most cap tables don’t break in the early rounds. They break later—when it’s too expensive to fix.
That’s why founders need to understand the equity trade-offs early. Not just how to issue shares or set strike prices, but how to build a cap table that still works at Series B.
Let’s start with the core difference.
Equity is ownership. Direct, immediate, and taxable the moment it vests. It gives voting rights and dividend potential (if those ever matter). Equity is often given to founders and very early team members — the ones taking risk before value is proven.
Options are promises. They give the right to buy shares later, usually at a set price. That means lower upfront tax, but also less control and slower realisation. Options are cleaner for hires post-traction — when value exists, and risk is lower.
The mistake?
Blurring the lines.
Giving too much equity to non-core contributors. Issuing options without understanding dilution. Or worse, waiting too long to expand the option pool — then scrambling when Series A hits.
So how do you keep it clean?
Start with a founder-friendly split that still makes room to hire. 70–80% founder ownership pre-seed is healthy, but don’t stretch past 90% without cause. You’ll pay for it later — in down rounds, reset valuations, or burned goodwill.
Plan your option pool early. Not just for one or two hires, but for the next 18–24 months. VCs expect a refreshed pool before Series A. If you don’t make space, they’ll make you — usually through dilution.
Track vesting schedules religiously. Four years with a one-year cliff is standard. But track actual ownership — not just what’s been promised. This matters more as you stack layers of funding and talent.
And document everything. Use a proper tool — Carta, Pulley, even Excel or Google Sheets with macros — but audit it monthly. Know what’s been granted, exercised, vested, or expired.
By the time Series B rolls around, your investors will look at the cap table like a balance sheet. They’ll want to know who owns what, when it vests, and how much firepower is left to attract late-stage execs.
If it’s messy, it’ll cost you. If it’s clean, it’ll sell you.
Your cap table is a narrative—of risk, value, and growth. Make sure it reads well when the stakes get real.
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