Explaination: Cap Tables are tabular representations of the number of shares owned by the shareholdesr of the Startup and the ESOP pool assigned for providing incentives to the employees. The cap table also specifies the percentage shareholding of the shareholders. There are two Cap Tables that is prepared pursuant to the investment transaction. One Cap Table shows the shareholding before investment and the second Cap Table shows the shareholding post the investment.
How it applies to Startup/Investor and its impact:
Cap tables are important for both Investors and Startups as it provides them with a clear understanding of their shareholding and their stake in the Start-up.
Note for Startup – A Start-up should always maintain a live Cap Table with the specific shareholding of all shareholders and any provisions created for incentives such as ESOPs. Further, such a Cap Table should be updated on each event that alters the particulars of the Cap table