Finance leadership
How funding and option pools change your cap table
See how a funding round and an option pool change ownership percentages, and how to keep the underlying records clear.
A cap table shows who holds your startup’s shares and how ownership could change. New investment, share options and convertible funding can affect the percentages. To understand the result, you need accurate starting records, a clear calculation basis and the actual terms of the proposed transaction.
The useful founder question is: if we accept this investment or create this option pool, what changes for each holder? Keep the current position separate from the scenario you are considering.
Start with issued shares and a separate fully diluted view
The issued-share view shows shares already held by shareholders. A fully diluted view also includes specified potential shares, such as outstanding options and an unallocated option reserve. Convertible instruments need assumptions based on their terms. Label exactly what your calculation includes.
An option reserve is not a shareholder and does not mean those shares have been issued. SeedLegals’ cap table guide distinguishes issued ownership from the fully diluted view that includes the option pool.
A simple funding and option-pool example
Assume founders hold 1,000,000 shares, all in one class, with no existing options or convertibles. A new investor receives 250,000 shares:
Total issued shares: 1,250,000.
Founders: 1,000,000 ÷ 1,250,000 = 80%.
New investor: 250,000 ÷ 1,250,000 = 20%.
Now suppose the company reserves a further 250,000 shares for future options after that investment. Including this reserve gives a fully diluted total of 1,500,000:
Founders: 1,000,000 ÷ 1,500,000 = about 66.7%.
Investor: 250,000 ÷ 1,500,000 = about 16.7%.
Unallocated option reserve: 250,000 ÷ 1,500,000 = about 16.7%.
The percentages are rounded. The issued-share split is still 80/20 at this point: the reserve represents potential future shares, not issued ownership. This example illustrates share counts; it does not value the company or model different share rights.
The order and terms matter
The example adds the pool after the investment. A round may instead require a pool to be included before the investor’s shares are calculated. That can change the price per share and who bears the dilution. SeedLegals explains the pre-money and post-money distinction.
If an investor has agreed to hold 20% on a fully diluted basis including the pool, the example above does not implement that agreement. Recalculate from the agreed terms. Include any conversion rights, share classes or other instruments that affect the result; do not assume every percentage means the same thing.
Build the table from records, not remembered percentages
Gather the register of members, share allotment and transfer records, investment documents, relevant approvals and option agreements. Record holders, share classes, share counts, transaction dates and the source for each entry. GOV.UK’s company-records guidance explains the records companies must keep.
A planning spreadsheet does not replace the underlying legal records or required approvals and filings. Resolve differences with the people responsible for those records before presenting the table as the current position.
Maintain it as the company changes
Assign an owner to update the table after share issues, transfers, option grants, exercises, lapses and conversions. Keep dated versions and supporting documents. Carta’s cap table guidance describes the importance of transaction updates and checking the table against source records.
Show granted options and the remaining unallocated reserve separately. Avoid counting a grant twice by adding it on top of an unchanged total pool. Before sharing a scenario, check the opening share count, each new transaction, the closing total and the percentage denominator.
Get help with the table or the wider decision
Startup CFO offers cap table management: building the table, maintaining it and modelling ownership changes. This can be a standalone piece of work with an agreed scope.
Reporting & planning provides regular reports and forecasts to help you understand performance and plan cash. Finance leadership adds optional experienced CFO support when funding or other decisions need more involvement.
Ask us about cap table support and tell us what you need to build, update or compare.
