How to choose the right software for cap table management


The cap table is one of the most important documents in a company’s life. When you're managing fundraising, having the best cap table makes all the difference. Cap tables show investors and employees how much money is in the company, who owns that equity and what rights come from that ownership. Yet while incredibly important for a startup’s equity division, cap tables can also be both time-consuming and challenging to properly manage. 

That’s why most startups turn away from spreadsheets, choosing to invest in cap table software and management tools instead. But with so many tools on the market today, picking the right one for your startup can be tricky. 

In this article, we’ll go through the benefits of cap table software and how you can pick the right one.

Why you need cap table software

Let’s start with the “why.” Cap tables are an essential document that businesses must consistently and accurately maintain but require time and effort to manage. Using cap table software significantly improves the management process and helps you more easily keep your cap table up to date.  

Here are the benefits of using cap table software.

Creates a single source of truth (SSOT).

Spreadsheets force you to create multiple versions of your cap table. Cap table software, on the other hand, updates your cap table automatically, ensuring that no matter how many updates you make, you’ll always have just one cap table to refer to.

Facilitates 409As.

When your valuer asks for your cap table during a 409A valuation, you can send the latest documentation over with just a click of a button. In fact, some cap table software allows you to grant access to certain information to your valuer, and revoke access once they are done.

Streamlines workflows.

Cap table software enables you to record actions like transferring stock or issuing stock options easily with built-in templates and simple forms. This streamlines your process of monitoring important funding elements like grants, approvals, options, and stocks.

Makes it easier to manage finance rounds. 

By leveraging cap table software, you can effectively stay on top of your equity division. You can also set it to calculate your overall ownership percentage automatically, so you’ll never lose track of your equity division during finance rounds.

Helps your startup remain compliant with laws and regulations.

Good cap table software is built with compliance in mind; not only will it notify you of any updates, but it will also assist in filling out your cap table, so you won’t miss important information. This should include Rule 701 analysis and Form 3921 readiness.

Customizable according to your startup's unique needs.

While templates are generalized and not scalable, cap table software allows you to customize your cap table to suit your needs and will scale with your company as you grow.

How to pick the right cap table software for you

It can be daunting to pick one out of the many options currently on the market. But here are six questions to consider as you browse.

  1. Is it easy to use? 
    Any new tool comes with a learning curve, but it’s important to pick a tool that you find easy to understand. Most software makes it easy to perform simple tasks like approvals, but make sure the same goes for more complex functions to avoid getting bogged down.
  2. Is it affordable?
    Cap table software can be a significant investment, especially if you’ve been using spreadsheets. Look for brands that scale with your growth and are transparent with their pricing.

  3. Is it secure?
    As your cap table contains sensitive information, you must choose software equipped with security features to protect your data. Consider options that offer different access levels and permissions so you can control exactly who has access to your cap table.

  4. What features does it have?
    Most cap table software will offer a similar stack of features. Look for all-encompassing ones that can give you in-depth insights into your cap table, such as an annual health check or exit modeling.

  5. What is the value it brings to my company? 
    Choose an option that gives the most value for its price. Look for testimonials and success stories featuring customers with similar business profiles to see what value the software brought to their business.
  6. Is it scalable?
    As your company grows, so will your cap table’s size and complexity. You won’t need all the bells and whistles at the start, so look for a full-stack solution that will scale with you from early-stage seed funding to Series A and beyond.

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