Cap Table Management: Avoid the Spreadsheet Trap
If you’re in charge of running a company’s finances or managing its rewards and benefits or compliance, we know you have lots on your plate. There’s so much to keep track of – staff, the accounts, the price points, the overheads, and much, much more. You need to keep an eye on your competitors, the market, and the various trends that affect your product and your people. Prepping for funding rounds, keeping investors happy…it’s full-on, we get it.
With all those other things to juggle, it can be easy to let cap table management and maintenance slip to the bottom of your to-do list. It can be easy to fall into an old trap: the Excel spreadsheet cap table.
We have one word of advice: don’t.
Your cap table is your ownership. But it’s more than that, it’s the story of your company – it is your company. It’s far too important to put into a spreadsheet that’s stored in a folder, or that has various different versions of it floating around in various email chains.
Your cap table should be a living, breathing representation of the ownership of your company: your single source of truth about who owns how many stocks or shares. As you grow, and as you go through funding rounds, your cap table should reflect every change, and the key stakeholders should have visibility over how those changes and dilutions impact their equity.
Here’s why you should use a cap table management tool, like Global Shares, rather than Excel.
Excel costs you more in the long run
This is probably the first reason you might be tempted to go for an Excel spreadsheet – it’s free. But here’s the thing – the money you save upfront by using it, you spend on labour-intensive, repetitive tasks. An Excel spreadsheet won’t update automatically when people leave the company or after a funding round.
Using a spreadsheet will cost you money in the long term.
As your company grows, your share ownership will grow more complex. You’ll give shares to new joiners, you’ll have good leavers and bad leavers, maybe a founder or two will leave. That’s before you even start thinking about investors.
Investors need to trust your cap table. The amount of issued equity directly affects how much their investment is worth. It needs to be accurate.
An inaccurate cap table can break a potential investment deal.
Spreadsheet = Mistakes
Excel is manual. Whoever is managing it will hopefully keep track of all the changes to shares and shareholders.
And what if they make a mistake? Even if it’s tiny, as the shares grow, they grow on top of that mistake. Now, your entire ownership is false. A spreadsheet can’t show you where the problem happened. If you’ve taken on investors, they’ve been given incorrect information. There is no audit trail.
Not to mention, even without errors, maintenance will take an increasing amount of time – tedious, manual time.
With Global Shares, you don’t have these problems. You have automated shareholder visibility, automated termination rules and vesting schedules – everything automated, everything accurate, and everything lightning-fast.
And just in case, you have a historical audit log of all changes made and version control.
You need a Single Source of Truth
Eventually, you’re going to need to show your cap table to other people, employees, investors, VCs. With Excel, how do you keep your data confidential and secure – how do you make sure that each person only sees what they need to, based on their role? You’d have to create a new spreadsheet that only shows the relevant information.
Which means that you no longer have a single source of truth. When ownership changes, you’ll need to update your spreadsheet. It’s not impossible, but it leaves a lot of room for error.
With Global Shares, you have secure role-based access on individual online portals for all users. They have full visibility, but they only see what they need to see.
Our platform also serves as a single source of truth for documentation. All the documents are stored in one secure online system, where they can be accessed as necessary.
And the most important part is right there in the name – a single source of truth. With Excel, a single source of truth doesn’t exist, so investors can only hope that all the information is correct and updated. With Global Shares, investors know they’re looking at the truth.
Get investment ready
When you’re in the middle of high growth and funding rounds, it can be hard to look towards the future – the day-to-day can be hectic.
With Excel, looking towards the future is even harder. If an investor makes you an offer, a spreadsheet won’t help. (At least, not without a lot of experts, tedious calculations.)
With Global Shares, you have automated and calculated scenario modelling so you can see exactly how new funding round or offer impact your company. And when you’re looking towards exit scenarios, look no further than our waterfall analysis tool. With accurate, audited records in place, those exit scenarios and valuations couldn’t be easier.
Excel doesn’t save time, money or future hassle – not in the short term, not in the long term. A spreadsheet can never be a part of a team.