Who Owns What – Understanding Early Stage Capitalization Tables [Part I]

Several years ago, I was speaking to a colleague of mine. He was trying to decide between two great job offers, and was having a difficult time making a final decision. I started asking about his compensation package. For salary and bonus, the two companies were equivalent. However, when it came to stock, there seemed to be a big difference. I tell this story as one simple example of the importance of actually understanding a company’s Capitalization Table (“cap table”) before transacting in their shares. Shareholders who don’t have a good grasp of this important investment concept are at a significant handicap when it comes to investing.