Using cap table software as a fundraising tool

Maintaining cap tables can be daunting, especially for growth and late-stage startups preparing for Series A, B, and C+ fundraising rounds. From accurately tracking equity transactions to ensuring all necessary shareholder information is included, cap table management can feel like a full-time job. 

That said, it's important for startups to realize that there’s a secret ally that can aid them in the fundraising process: cap table software. It can help founders track stock options, equity splits, and ownership information, and record changes in ownership due to new investments or dilution. With cap table software at their side, startups can better navigate their way through fundraising rounds toward achieving their goals.

In our article, we’ll go through the different ways you can use cap table software for fundraising.  

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Why cap table software?

Dedicated cap table solutions play a critical role in assisting startups with fundraising by first and foremost, offering a clear view of their equity ownership structure. This proves invaluable not only for internal decision-making but also when attracting potential investors, as cap tables are frequently requested by investors to assess the viability of investing in your startup.

Moreover, cap table software also comes with a range of unique features, including scenario modeling, automated tracking and monitoring, and built-in calculators to help startups track their changing equity ownership structures while staying on the right side of the law. 

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How cap table software helps with fundraising

Though your fundraising experience can vary based on whether you’re pitching to hedge funds, venture capitalists, or even banks, one thing holds true across all investors: they’re going to scrutinize your cap tables. To help you meet their expectations, cap table software must be utilized as they:

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Keep things organized and accurate

When your cap tables are disorganized, it sends a clear signal of unprofessionalism. This messiness can indicate to investors that you don't take equity management seriously and that you may face confusion among stakeholders surrounding ownership in the future.

Cap table software, with its ability to track and monitor transactions, ensures that your cap tables present clear insights and breakdowns of your startup’s ownership structure. From ownership tracking to employee options to funding sources and shareholder counts, clear and clean cap tables allows convenient access to crucial details and precisely depict your startup's financial objectives. This makes it straightforward for investors to analyze the necessary information before making a decision. 

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Empower your decision-making

While cash is key for attracting potential investors, information is key when it comes to making informed decisions. This assumes, of course, that your cap table is properly maintained because inaccurate information can result in misguided decision-making. 

For example, certain cap table software provides financial round modeling as a feature. This empowers startups by helping them understand the potential consequences of hypothetical endeavors. By leveraging this, startups can proactively evaluate different funding scenarios, optimize their fundraising strategies, and effectively communicate their financial projections to shareholders, fostering transparency and trust in the fundraising process.

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What cap table software offers

Good cap table software is far more than a record of ownership structures. It should be an indispensable tool that can help startups like yours prepare for fundraising rounds. A good cap table solution offers:

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Scenario modeling

Financial round modeling is essential for startups preparing for a fundraising round. It enables startups to accurately project future investments and dilution, giving them a clear understanding of their venture’s financials. With this, startups can make informed decisions regarding potential deal terms and assess the impact on current shareholders. 

This visualization also helps attract investors by showcasing the startup’s understanding of the implications of new investments and how they prioritize the interests of current shareholders.

As part of any fundraising effort, startups like yours should understand how future rounds of financing might impact your startup. Founders should be able to see how their cap tables might change with the help of visual scenario modeler, which offers the ability to incorporate convertible instruments (e.g. SAFEs and notes), along with the flexibility to adjust pre and post-money valuations and discounts associated with each investment.

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Customer support

Cap table management platforms shouldn’t just offer excellent functionality. They should also come with reliable and responsive customer support coupled with a wealth of supporting resources.

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Data portability

Many cap table solutions don’t offer robust features like financial modeling, which make it easier for startups to fundraise. If this applies to you, it could be worth considering moving to another platform. While the idea of migration may seem daunting, the reality is far from it. 

Look for a solution with a variety of formats available for export and import, coupled with flexible migration support tailored to your startup's needs for a worry-free process.

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Raising funds with your cap table

Fundraising is one of the toughest aspects of running a startup. But with the right tools and guidance, it also represents the opportunity to secure the capital needed to propel your startup.