A cap table is the list of owners (equity holders) and how their ownership percentage is distributed. In high-growth startups, proper distribution of equity is key for keeping founders and investors aligned over time. Here are some points to consider: Accelerator programs often take equity in startups Startups typically share 10%-20% of equity in each … Continue reading “3 key moments to examine your cap table”
A cap table is the list of owners (equity holders) and how their ownership percentage is distributed. In high-growth startups, proper distribution of equity is key for keeping founders and investors aligned over time.
Here are some points to consider:
- Accelerator programs often take equity in startups
- Startups typically share 10%-20% of equity in each financing round
- Founding teams in Latin America often seek to reach a Series A round with at least 50% of the company
Below is a graph of how a cap table can change over time.
Cap tables are re-organized at financing rounds so these are the moments to make sure you are set up for optimization.
Three key moments to review your cap table:
1. Founding: This is the most important part of the cap table and founders are benefited from having tough conversations up front. It often seems fair to divide ownership equally between three or four people, but it may not be optimal for the startup. The more founders a startup has, the less equity each individual will have and equal amounts spread across many people can make decision-making slower. I believe one or two founders should have significant share of the equity of a startup.
Founder vesting is a tool that can help align and incentivize founders as well as avoid “dead equity” left by members of the team who decide to leave, but retain equity stakes. Many future investors will require this term.
2. Angel, Acceleration, Seed Rounds: According to PECAP the median seed round in Peru is for 15% of the startup. Often, this 15% is split among more than one accelerator program or angel investor, leaving a cap table atomized without one investor or investor group having a significant share of the startup. This can make it hard for investors to dedicate time to add value and improve corporate governance. Founders want pick accelerator programs and investors that can add the most value by helping the startup achieve operating milestones and raise the Series A round.
3. Series A: Preparing for Series A can put a startup in a position to succeed long term. Series A investors will be keen to make sure that a founding team has enough incentives following the round – a good goal is 50% of the company going into the round. Investors should be aware that Series A investors may require a 10% Employee Stock Option Pool (ESOP) and ask that it is included in the pre-money valuation.
- Ragi Burhum of AmigoCloud recommends that founders should up an employee pool much earlier that prior to a Series A round
- Facundo Turconi of Solven, pointed out to me that for single founder startup it may make sense to consider a larger ESOP, of perhaps 15%.
Takeaway and Cap Table Example:
Founders and investors should seek to maintain a cap table that leaves enough incentives for founders and flexibility to add the right investors at the right time. You can find a template example for a cap table in Excel here.
Chris Heivly of Techstars recently conducted an assessment of the Lima Startup Community. This is an excellent resource – an objective and highly credible measure of where we stand and how we can do a better job of building our startup community. Continue reading “Techstars – Recommendations for Lima’s startup community”
There a lot of great pitch decks out there for founders to use as references. Pitch decks don’t need to be fancy, but they should tell a story and be fun and inspiring, like this Dropbox pitch deck. Continue reading “The pitch deck – forwards and backwards”
Immigrants are a key driver for Peru’s startup community. Founders from other countries bring fresh ideas and valuable connections. Matias Maciel, an Argentine, moved to Peru to take on a regional role at Western Union’s finance team. Now, Matias is CFO and co-founder of Rextie, startup that helps users find the best FX rates and exchange money. Continue reading “Why immigrants are essential to Peru’s startup community”
No, but it definitely helps. Building startups is hard and founders should look for ways to increase the probability of success. One way to do this is to use English. Founders that are comfortable writing and speaking in English open themselves up to a wider range of funding sources, advisors and talent. Continue reading “Is English a must for startup founders?”
This year the Peru Venture Capital Conference will take place on September 11th. The theme is “Invest in the future” – a great way to think about supporting startup communities and backing founders in the Peru ecosystem.
The conference will have a group speakers, including Jason Portnoy, formerly of PayPal and Palantir.
Last year, Chris Heivly of Techstars was the keynote speaker and his message that day, and work in our ecosystem since then, continue to leave an enduring impact.
UTEC is playing a leading role in organizing the event locally, along with the support of IDB, FOMIN, COFIDE and Startup Peru.
I encourage you to sign up here now and attend. Events like this help our startup community to grow and connect with founders and investors outside of Peru.
Mi nombre es María del Mar Vélez y soy la fundadora de Crack The Code, un laboratorio de tecnología para niños y jóvenes. Me mudé a Lima hace exactamente 18 meses, venía de pasar casi 6 años trabajando en Finanzas en Nueva York. Sabía que quería hacer algo diferente ahora que llegaba a Perú, no conocía a mucha gente (soy colombiana) y crear un “network” no fue fácil, pero estos cuatro puntos fueron claves para lograrlo: Continue reading “Como crear un network”
Sé que suena demasiado idealista pero siempre he pensado que en algún momento de nuestras vidas, todos los peruanos tenemos la obligación de contribuir algo para mejorar el Perú. Uno de mis granitos de arena ha sido participar como juez de Startup Perú en varias ocasiones. Honestamente, ¡me lo tomo muy en serio! Continue reading “¿Qué es lo que busco como juez de Startup Perú?”
The premier conference for female startup founders in Latin America takes place this year on November 6th and 7th at the Universidad del Pacífico campus in Lima, Peru. Continue reading “Pitch Competition for Female Founders – Apply Now!”