Your cap table is one of the first things any serious investor will ask to see. It tells them exactly who owns what, how dilution has played out so far, and – crucially – how much upside is actually left. Getting it right before your first external raise isn’t just about looking prepared. It’s about avoiding problems you’ll spend years trying to unwind.
Here’s what you need to know before the term sheets start arriving.
Raising soon? Get your cap table clean, compliant, and investor-ready – let’s talk.
What is a cap table, actually?
A capitalisation table (cap table) is a record of who owns shares in your company, what type of shares they hold, and what percentage of the company each shareholder represents. It also needs to account for any instruments that will convert into equity in the future – things like Convertible Loan Notes (CLNs) or Advanced Subscription Agreements (ASAs).
At the very early stage, it might just be the founders. The moment you take on investment – or even issue options to employees – it starts getting more complicated.
Common mistakes founders make before their first raise
The cap table errors we see most often:
Uneven founder splits that haven’t been addressed. A 90/10 split between co-founders can raise red flags for investors, especially if the minority founder is doing just as much work. It suggests the relationship hasn’t been thought through properly.
No vesting schedule. Investor-friendly cap tables have founder vesting in place. A standard structure is a four-year vest with a one-year cliff. Without it, there’s nothing stopping a co-founder from walking away early with their full stake intact.
Options issued informally. Some founders grant “options” to early employees or advisors without setting up a proper Enterprise Management Incentive (EMI) scheme. Those informal promises can create legal uncertainty and complicate due diligence.
Forgotten shareholders. That early advisor who got 2% and hasn’t been in touch since year one? Investors will find them. Make sure you know where every share sits and that all agreements are documented.
Building in an option pool
Before your first raise, you’ll need to think about your option pool – the reserve of unissued shares set aside for future employees and key hires. Most early-stage investors will ask for a 10-15% option pool to be in place (or expanded to that level) before their investment lands.
The timing of when the pool is created matters more than most founders realise. If you agree to create or top up the pool before the investment comes in, it comes out of the existing shareholders – meaning the founders absorb the dilution, not the new investor. Understand this dynamic before you sign anything.
Convertibles: ASAs and CLNs
Many early UK raises now happen via convertible instruments rather than priced equity rounds. ASAs and CLNs both allow investors to put money in now with conversion into shares happening at a later date – usually at your next priced round.
Both instruments need to be reflected in your cap table on a fully diluted basis, meaning you model out what the ownership structure looks like assuming all convertibles have converted. Any investor worth their salt will ask for this view, and if you can’t produce it quickly, that’s a red flag.
What investors actually want to see
When an investor reviews your cap table, they’re asking a few specific questions. Is the founder still sufficiently incentivised? Is there a functioning option pool? Are there any unusual share classes or rights that could complicate governance? Are there any side agreements, drag-along provisions or pre-emption rights that haven’t been disclosed?
A clean, well-documented cap table signals that you understand your own business and that you’ve been thinking like an investable company from early on. A messy one – full of gaps, informal arrangements and unconverted instruments – signals the opposite.
Getting it clean before you raise
The best time to fix your cap table is before you start talking to investors, not during due diligence. Restructuring equity mid-raise is slow, expensive and can erode trust at exactly the wrong moment.
If you’re approaching your first external raise and want to make sure your share structure is clean, investor-ready and properly understood, our team works with founders at exactly this stage.
Talk to us about getting your company structured correctly before your raise – we’re here to help!
