Don’t Pay Too Much! Use Cap Tables to Ensure Acquisition Deals Are Priced Right

Angel investing is risky. This is a mantra my readers have heard me repeat time and again….I don’t have a PhD in finance (so) I’ve made it a priority to understand the fundamentals of capitalization tables, known as “cap tables.”

A pro-forma capitalization table is a spreadsheet that reflects the capitalization structure of a company today as well as immediately following a potential investment … Cap tables are typically attached as an exhibit to a financing term sheet. An investor can also use a pro forma cap table to help assess the effect on their ownership of dilution from future rounds. Finally, a pro forma cap table can be used to estimate the likely allocation of returns if the company is sold and quantify potential returns based on estimated proceeds in various exit scenarios.

The more time I spend with these spreadsheets, the cooler they become. Here’s why… continue