Cap Table Math Made Simple for Startup Founders

Divyansh Bhargava -

Cap tables are like plumbing: invisible when they work, catastrophic when they don’t. Most founders don’t really understand dilution until it’s already cost them 30–40% of their company. This guide is a plain-English breakdown of cap table mechanics.

What’s in a Cap Table?

Your fully diluted cap table is more than just issued shares. It includes everything that could turn into equity: common stock, preferred stock, SAFEs, convertible notes, and the option pool (existing and planned).

"Cap tables should always be modeled fully diluted. Anything else is fiction."

— Leo Polovets, Susa Ventures

Here’s what that typically looks like:

How Much Do You Lose Per Round?

If you're sitting on 65% ownership at Seed, you may have <15% left by Series C. Plan accordingly.

The Option Pool Shuffle (and Why It Screws Founders)

Investors often require a 15% option pool—but they’ll ask you to create it pre-money, which means it comes out of your shares, not theirs.

Here’s the Trick:

  • Valuation: $10M (pre-money)
  • Raise: $2M
  • Required ESOP post-round: 15%

Founders absorb 15% dilution, even though investors benefit from it. It’s negotiable—but only if you know to ask.

"An option pool shuffle is the oldest trick in the book. Be aware who’s paying for it."

— Jason Lemkin, SaaStr

SAFEs: Simple on Paper, Confusing in Reality

A SAFE isn’t free money—it’s a future equity promise. And how it converts depends on whether it has a valuation cap, a discount, or both.

Real Conversion Example

"Most founders underestimate the cumulative dilution from multiple post-money SAFEs."

— Michael Seibel, Y Combinator

A SAFE cap isn’t a valuation. If you have 3 SAFEs at different caps, they each convert at different levels—and you’ll be surprised by how fast they stack.

Convertible Notes

Convertible notes are debt that become equity. They typically include:

  • Interest (5–8%)
  • A discount (usually 20%)
  • A cap (sometimes)

Let’s model one:

Founders often forget: interest compounds into equity, too.

Clean vs. Dirty Cap Tables

Let’s compare two real-world early-stage scenarios:

Clean Cap Table (Seed)

Founders retain majority control, minimal future headaches.

Messy Cap Table (Stacked SAFEs, ESOP Top-Up)

Founder ends up with ~50% pre-Series A. After A? Likely under 30%.

Why VCs Walk Away

Here’s what makes a cap table a deal-breaker:

“A clean cap table is like a clean house. It tells us how you operate.”

— Jeff Bussgang, Flybridge Capital

🛠 Tools Worth Using

Wrapping It Up:

Cap tables might seem abstract early on, but they become very real — fast.

Let’s break it down:

Startups don’t die because of bad math — they just get owned by it.

Here’s the takeaway:

  • Round 1: You give up 20–25%
  • Round 2: You lose another 15–20%
  • ESOP? Budget another 10–15%
  • By Series C, you might own <20% if you didn’t plan well

🔢 The difference between a $100M exit with 12% vs. $100M exit with 40%?

One buys you freedom. The other buys you a decent paycheck.

Simple rule:

Raise what you need, model everything, and never forget that equity is your most expensive currency.