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Cap Table Mistakes: Top 3 Common Cap Table Mistakes To Avoid

In this article:

  1. Cap table mistakes to avoid
  2. Mistake 1: Poor version and access control
  3. Mistake 2: Documents all over the place
  4. Mistake 3: Your cap table is out of date

 

Cap table mistakes to avoid

 

Your cap table is a complete record of company ownership. Cap tables are important to set up correctly and maintain, since they’re used everywhere from funding rounds to compliance and audit. A well-maintained cap table means you can avoid costly mistakes that require painful, expensive correction. Read our Complete Guide to Cap Tables if you’re just getting started.

Our independent research with techUK revealed 72% of fintech founders use spreadsheets (Excel, Google Sheets) to manage their cap table. Imagine that: the UK’s cutting-edge companies building the most innovative fintech solutions are still using stacks of paper and messy Excel spreadsheets to manage their shareholding.

While this system works for a while, almost every cap table in a spreadsheet includes mistakes. Most errors come from version control, a lack of appropriate access, or things been out of date.

We cover the top three common cap table mistakes below, and discuss how our simple, intuitive cap table tool QCap can help. 

 

Mistake 1: Poor version and access control

Founders might not share the full, unabridged version of their cap table with everyone. So, you might limit what you share with employees or investors, as opposed to what your co-founders see. The problem? Lots of versions of your cap table in circulation. It’s difficult to keep track of who has access to what version, and hard to ensure everyone’s version is up to date.

What could go wrong?

  • Let’s say you’ve printed or emailed your cap table to an investor. This takes it from a ‘live’ editable version to a static document. You later update your cap table, but forget to share it with this investor, who realises and isn’t happy about it.
  • You accidentally share the master version instead of a limited one with an external party. This has information about your investors, such as contact details, DOBs and addresses. Not good.
  • Your cap table is leaked publicly. Whether accidental or not, you now have to manually go through every email with investors and match what version you shared with each party, to determine how this happened.

How can QCap help?

  • There’s one version of your cap table that’s always live. You can share this fully with other admins or grant view-only access (e.g. for your accountant).
  • You can invite investors to QCap, giving them a portal with details about their investment. 
  • QCap lets you send automatic notifications to your investors. You can send them email updates about their investment directly in QCap.
QCap holds one version of your cap table that’s always live

Mistake 2: Poorly managed documents

Several documents support your cap table: like shareholder agreements, share certificates and Companies House forms. It’s important the documents themselves are up to date, but also that relevant parties can find the latest version easily. Version control is especially important around liquidity events, where you might have multiple people working on one document. 

 

What could go wrong?

  • Ahead of a liquidity event, co-founders and lawyers are working on the same document. Lots of different versions are in circulation, causing confusion and minor errors. These mistakes go unnoticed in the version circulated to shareholders. 
  • After a liquidity event, the final versions of documents related to the latest raise are lost in email chains, on personal devices, or in the personal drive of a person who no longer works at the company. 

How can QCap help?

  • With QCap, you have boilerplate templates to support liquidity events. You’re not creating these from scratch, so fewer mistakes are made when personalising them.
  • Save and organise the latest version of your documents in a central place. Use tags so you know whether they’re company, investment or compliance documents.

 

Mistake 3: Your cap table is out of date

The simpler your cap table, the easier it is to keep up to date. However, over time you’ll find your cap table growing more complex, and potentially needing to be updated more frequently. 

Lots of firms struggle to maintain an updated cap table, and the number one reason for this is that it’s usually a painstaking process. For smaller teams, this could mean founders and director-level members of the team have to spend days working with slow, lagging spreadsheets when they could be working to grow the business instead.

 

What could go wrong?

  • One of your investors changes their email address. You delay recording this minor change because you’re not quite sure how many versions of your cap table you’ll need to update. So, you don’t update every version before the next investor update, which goes to the incorrect email. This continues to happen for several months until the investor complains about not receiving crucial updates.

How can QCap help?

  • With QCap, you update one, always-live version of your cap table. So you only need to amend shareholder information once, and you can even do it from your phone. No need to set time aside to get your laptop out, and update several static spreadsheets (then having to save them on Google Drive, making sure they’re the latest version…)

So, now you know what cap table mistakes to avoid. Set yourself up for success and check your cap table. If you’d like to try QCap for free, sign up here for a 30-day free trial. No credit card required.

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