The capitalization table, commonly known as cap table, is a living, breathing document that grows with you as your business grows. In many ways, your cap table tells your startup's story, and you want to write it well.
We heard a story about a certain startup founder who had his first cap table on a table napkin. It's a good way to start, and a great story to tell the grand kids; though obviously this cap table napkin will not hold for a day!
If you're the startup founder in that story, you have to take that cap table napkin out of your back pocket, pull up a spreadsheet, and make it official by recording your (and likely your co-founder's) first investments. Soon, you will also start adding your first investors (likely your family and friends) and your first hires to the list.
That's just about as basic as your cap table creation can get. When you start raising funds and adding more shareholders, signing up for a cap table management tool becomes a part of your startup's story.
In fact, you find out immediately that your cap table management software will be an important tool from that point onwards — from raising funds, updating investors, and issuing advisory shares and equity grants.
When do you need to get your cap table out of a spreadsheet and into a cap table software?
Having a spreadsheet-based cap table is still common among smaller companies. Just to be clear, we are not against spreadsheets! Things like cap table modelling and pre forma cap tables are still often done on spreadsheets.
Here at Cake, we even provide the ability for Cake users to download their cap tables into a .csv file that they can convert into a spreadsheet for whatever purpose they have at any given moment.
The point is, we're not suggesting that you completely ditch the spreadsheet. However, you do need a single source of truth that you can always refer back to. Especially for sensitive equity-related transactions, you want the most updated data stored and accessible in one place.
With that said, we've seen startups move their cap table spreadsheets into a cap table software as soon as they start raising funds or granting stock options to employees.
Cap table and equity management can become complex and expensive quite quickly, especially when you factor in legal fees. A reliable cap table software can be a lifesaver at a time when you need your energy and resources directed to hiring employees, developing your product, or growing your business.
Why do you need a cap table software?
When choosing a cap table management software, you need to start with your WHY. Each startup has unique contexts and business objectives. Knowing what's important to your business now and in the future will help you choose the right tools that will scale with you. Here are some of the most common use cases for cap tables.
Get better terms when raising funds
Growing a business usually requires several financing rounds, and in every round of investment, a shareholder's ownership is affected or diluted. Negotiating the terms of these investment agreements is more efficient when the startup has a clean and updated cap table in place. Besides, not having an organized cap table management system might impact your ability to attract additional investment in the first place.
Simplify issuing stock options
Setting up a stock option pool is also common among startups, whether it's granting company equity to startup advisors and first hired employees. Stock options vest over time, and keeping track of these for each round of option grants is another use case for your cap table. There are heaps of equity-related information involved such as repurchases, transfers, early exercises, restricted stock, and so on. A good cap table processes these information efficiently and accurately.
Tax compliance and regulation are another two important aspects of cap table management. If your company uses a spreadsheet for a cap table, you could spend hours figuring out what information needs to go where when it comes to submitting tax forms.
Enable hiring of key employees
Equity compensation is an excellent way for startups that don't have the cash (yet) to attract the best talent. Employee stock option plans are a norm in the tech startup space and you want to consider setting this up this early on. Designing and implementing compensation packages is simplified when you have a cap table that provides detailed information about each employee's equity agreement.
Are you planning to take your business global? Whether you dream of establishing a global presence or you're thinking about hiring a global team, you need a software that takes internationalization into consideration.
Now, cap tables and equity management go hand-in-hand. The best cap table management is one that does that capitalization work for you while also automating processes such as issuing shareholder agreements that comply with country-specific laws and taxations.
What criteria should you consider when choosing the right cap table management software?
Ease of use
Just like most startup founders, you likely started with a cap table spreadsheet. Setting up and uploading your spreadsheet into the cap table software should be fast and easy. As you start updating and managing your cap table, stakeholders (investors, employees, advisors) should be able to navigate the dashboard and find what they need easily. Calculations should be streamlined and automated. Expert support should be available.
Most series A startups bring along a law firm to do the cap table management for them, just to make sure that all the legal aspects are covered.
Here at Cake, we have legal partners who have tested Cake to ensure legal compliance and ease of use, many of them recommend us to their clients. Taking it from Ajay Prakash, CEO from Entrylevel, "All our legal partners use Cake, which makes it easier when the ecosystem is cool with it."
In today's digital, post-pandemic world, work is more globalized than it's ever been. A lot of equity management and cap table management tools are focused on specific countries or regions, which can be limiting for companies with remote workers or those that want to open up their hiring pool to talent from around the world. Complying to country-specific taxation, for example, is important when issuing stock options to an employee outside of your base country. The best cap table management software covers this for you, leaving you one one less thing to worry about, so you can focus on actually running your business.
And as we earlier established, most early stage companies that need this kind of technology are still engaged in funding rounds while they direct cash towards growth. The best cap table management software gives you all the essential functionalities you need without breaking the bank. Some cap table management software are even free to start with, which is the most ideal scenario for early stage companies.
Gone are the days where legal documents are printed on paper and stored away in metal file cabinets. While this is a no-brainer, it's important to call out that you want your cap table to have all the important digital functionalities needed in today's startup environment. Functionalities like mobile accessibility, electronic signatures, real time updates.
A lot of stake holders will be accessing your cap table software from different parts of the world, in different timezones, so you want it accessible 24/7.
What each startup needs from their cap table management software differs from company to company. Along with a user-friendly interface and intuitive design, the best cap table management software provides tools that make generating recurring reports easy. Built-in features that make complying with different tax laws are also important. The software also needs to be compatible with any device so that sharing information when necessary is possible.
Carta has clearly dominated this space for years, particularly in the United States. SeedLegals is widely known in the UK, whereas Cake Equity has a huge presence in the Australian startup scene.
Carta is available in multiple countries (US, UK, SG, and AU, to name a few) but more deeply established in the regulatory, legal, and tax systems in the US. If you're outside of the regions where it's currently available, it may not be the most helpful software for you. Carta is also intended for enterprise use, which makes it complex and expensive for startups.
Over the past years, there have been a growing number of Carta alternatives that are worth your consideration. Whether you're building your first cap table or you're unhappy with your current cap table software, you're in the right place.
If you're in the market looking for the best cap table management software, we curated a list to help your search, assessing each one against these top 3 criteria:
- Ease of use
- Global focus
Without further ado, here's our shortlist, in no order:
Top cap table software for startups
- Ease of use: Straightforward, with self- or assisted onboarding available.
- Global focus: Only available in the US
- Affordability: Free to start, $60 months past 10 shareholders
- Ease of use: Straightforward and easy-to-use, with helpful features like a built-in equity calculator to convert percentages to monetary amounts.
- Global focus: Only available in the US
- Affordability: Free trial period up to 25 stakeholders, paid subscription plans range from $1200-$3500 per year
- Ease of use: Geared toward enterprise companies, and requires talking to sales to get started. Not many resources for customers who might struggle to use the platform.
- Global focus: Available globally, with greater presence in Europe, Middle East and Africa
- Affordability: No free trial, $3 per month
- Ease of use: Relatively straight-forward for self-onboarding; assisted onboarding is available at an additional cost
- Global focus: Only available in New Zealand and Australia
- Affordability: $2 per stakeholder no matter the size of the company, with added costs for certain features
- Ease of use: Straight-forward with self-onboarding
- Global focus: Focus on the UK
- Affordability: 7-day free trial available, up to £999 in annual fee upfront
- Ease of use: More complex, with onboarding process that requires booking a demo and speaking to sales before getting started.
- Global focus: Only available in the EU
- Affordability: No free trial, pricing not easily available; they need to gather personal/company details to quote.
- Ease of use: Requires talking to sales to get started. More complex and time-consuming to set up.
- Global focus: Only available in the UK
- Affordability: 3 pricing tiers ranging from £1,620-£3,780 for the first 10 scheme members, increasing as you add more
- Ease of use: Quick setup and automates cap table based on provided data.
- Global focus: Based in the US but has a global presence.
- Affordability: free trial for 30 days, afterwards $5-$10 per month per stakeholder
- Ease of use: Quick setup with support
- Global focus: Has established markets in India, Singapore, and US
- Affordability: Free up to 10 stakeholders, Plans vary according to location, pricing ranges from approximately $740- $4,880
- Ease of use: Simple to use
- Global focus: Based in Europe but has global presence
- Affordability: Free up to 25 stakeholders; pricing ranges from $200-$600 per month
Cake has a mission: To simplify cap table and equity management, bringing together the necessary tools needed to help ambitious startup founders do what they need to do to grow their business, wherever they are in the world.
Ease of use
Cake allows you to set up your cap table and send your first offer letter in just a few clicks.
If you already have a cap table, whether it lives in another kind of software or a spreadsheet, you can import it over to Cake — and we'll help you set it up to make sure it's perfect (for free!).
Many of the most known cap table softwares are slowed down by enterprise products with long sales cycles. Not Cake. You can sign up and build your cap table today for free.
Cake allows for simple, streamlined, and transparent cap table and equity management. It features a clean, easy-to-navigate dashboard, document storage, and signing, all in one place. It's also a single source of truth that's based in the cloud. No matter who needs to access their equity plan, they can always know they're getting the most accurate, up-to-date information with Cake.
Cake takes pride in being one of the few cap table and equity management softwares that is truly global. It's flexible enough to work anywhere in the world, while also handling legal, compliance, and tax matters for any country or region. What does that mean for you? No matter where you're based and no matter where your employees are based, Cake will make sure everyone's equity plans are compliant with all local laws and regulations.
Most cap table and ESOP management tools are geared toward enterprise companies, which makes them complicated and expensive. Not Cake — our freemium pricing model allows for up to five employees on your equity plan free of charge, allowing you to manage your tooling budget as you scale.
Watch this product demo and see how we can help make equity and cap table management like a piece of cake!
This blog is designed and intended to provide general information in summary form on general topics. The contents do not constitute legal, financial or tax advice and should not be relied upon as such. If you would like to chat with a lawyer, please get in touch and we can introduce you to one of our very friendly legal partners.