Cap Table Spreadsheets are Excel spreadsheets that list all the current equity stake available for an individual stock or company in the market. Equity values are shown as a percentage of the market cap. All the stocks you can see are in the “cap table” or are blue columns. This is normally reflected in a separate tab to the spreadsheet which displays the current debt total from investor to any type of financial calculation and also shows if any particular stock is up or down in value.

Recently, I have come across a number of potential startup candidates and recently hired new employees who have absolutely no idea what their equity actually is. After months of searching and consulting with investment banks and business mentors, I have found cap tables to be an amazingly powerful analytical tool that can reveal all the information you need to know. The Cap Table is extremely easy to use. For example, instead of clicking hundreds of buttons and opening dozens of windows, you only have to right-click on your chosen cell in the cap table spreadsheet, open the “EVA Graph” tab, and then click “OK”.

If you’re familiar with Excel, then you can create your own cap table spreadsheet using the built in formula or by downloading an entire cap table from a stock incentive website. You can even customize your own depending on how you wish to view it. The simplest form of a cap table is one with x’s and y’s formatted in different ways – like a pie chart. More sophisticated and useful formulas include moving averages, moving average convergence/Divergence, relative strength index (RSI), and other similar tools.

In my experience, startups that are highly incentivized (i.e. provide stock incentives for investors) tend to have strong founders with strong track records. Typically, the best way to evaluate the worthiness of a startup is to look at its history. Unfortunately, if the company was acquired too young, its history may be nonexistent and therefore difficult to evaluate. But if you look at established startup s, the owners have probably had years of experience and are reaping the benefits of their investment, thereby justifying their high valuation.

Dilation of ownership. One of the biggest issues for potential startup s is dilution of their ownership interests. When an early investor lends his money, he or she receives a call option to purchase a portion of the equity, known as an “exercise trigger”. This means that when this trigger is triggered, the buyer has the option to buy a pre-determined portion of the stake. However, the early owner cannot exercise his or her call option until the startup makes money, which complicates matters.

Therefore, calculating the amount of dilution needed to optimize your returns can be complicated, even when you use a cap table. Fortunately, there are a number of tools that allow you to do this, such as the Dilution Odds Tool, which analyzes exit scenarios based on how much equity the founders have in their business. By adding or subtracting the expected exit from the starting balance, you can calculate how much equity the founder will have upon departure. This information tells you how much equity the company will lose upon the acquisition of another firm, whether it is permanent or temporary.

The best thing about cap tables is that they are customizable. You can include different scenarios in your spreadsheet, such as how much equity the founder will own upon acquisition and what type of acquisition (e.g., an acquisition through an angel investor). You can also exclude some scenarios from your calculations, such as a business that does not intend to make a sale within a defined period of time, or if the founder already owns all of the shares of the business. Using a cap table spreadsheet allows you to address these issues easily and efficiently.

Capitalizing on the risk and opportunity associated with starting a new business can be a difficult process for a small business owner. If you want to calculate the potential equity needed to launch your venture, use a cap table. Enter numbers into the Dilution Odds input box to get the value of your potential equity interest. The Dilution Odds should be updated to take into account the percentage change in your Dilution Pool over time, as well as changes in the price of the company’s stock or the performance of the company as a whole. Once you have determined your equity stake, you can then adjust the numbers to determine the amount of cash needed to acquire more equity.