Startup Funding Espresso -- Problem Signs in a Cap Table
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. The Cap Table is an important part of any diligence process. In reviewing a startup\u2019s Cap Table, look for these signs of a problem: The current team has little equity and thus little incentive to see it through to an exit. The Cap Table is complicated with multiple share classes. The early rounds came with complex rights and terms including liquidation preferences, ratchets, and clawbacks. Founders who left the company still own substantial amounts of equity. There\u2019s no options pool which means all compensation will need to be paid out of cash. There are too many individuals on the Cap Table. Convertible notes, options, warrants, and other items are not listed in the Cap Table but exist in the business.\xa0 Existing investors retain sign-off rights on additional funding. The Cap Table is a standard due diligence document so don\u2019t invest without first reviewing it. Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today. ___________________________________ For more episodes from Investor Connect, please visit the site at: \xa0 Check out our other podcasts here: \xa0 For Investors check out: \xa0 For Startups check out: \xa0 For eGuides check out: \xa0 For upcoming Events, check out \xa0 For Feedback please contact info@tencapital.group\xa0\xa0 Music courtesy of