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  Capitalization Table

• Do you know what the dilution effect will be on your percentage of ownership after follow on rounds of investment?
• Do you know what the anticipated “step up” value will be if the business meets or exceeds performance expectations?
• Can you predict when the most opportune time is for an exit based upon current market conditions and expected investment requirements?

Description: The Capitalization Table provides an analysis of the founders and investors percentage of ownership, equity dilution, and value of equity in each round of investment. This cash-on-cash analysis provides a sophisticated method for analyzing the optimal number of rounds and amount of investment the venture model will support based upon current acquisition and initial public offering values. The cap table model is based upon the assumption that investors in each round will expect a 38% equity position. Two tables are presented. The 2X Table reflects an analysis that anticipates that the value of the venture will double after each round of funding based upon achieving predicted performance milestones and the efficient and effective use of the investment capital during the round. The 3X table anticipates the venture value will triple between rounds (the potential scenarios are virtually limitless varying from a negative change between rounds {a down round} to any positive multiple).

Purpose: The Capitalization Table is designed to: 1) reflect the percentage of equity ownership and cash value of equity with each round of investment; 2) reflect the increase in equity value associated with a doubling and tripling of venture value between investment rounds; and 3) identify in which round and at what value, the investment is most likely to realize an acquisition or IPO based upon industry sector averages.

Scores: The Capitalization Table provides a general analysis on the effects of “step—up” values on equity ownership percentage and cash values. In reality, step-up values will vary between rounds based upon the performance of the venture and market conditions. Likewise the percentage of investor equity (38%) will vary between rounds.

Readiness Level Tools: The Capitalization Table is one of several tools to assist entrepreneurs and investors in evaluating the status, quality, and value of a startup or early stage ventures. Database support for these tools are based upon national venture capital funding averages by stage of development, generally expected investor rates of return, and expertise gained from direct interaction with hundreds of startup and early-stage angel and venture capital financed business ventures. The recommended sequence for using the Readiness Level Tools is as follows:
  1. Entrepreneurial Readiness Survey
  2. Risk Readiness Survey
  3. Venture Readiness Model
  4. Business Plan Readiness Survey
  5. Venture Valuation
  6. Capitalization Table.

The Entrepreneurial Readiness Survey is FREE so give it a try, or click here to subscribe to the full Readiness Level Tool Set


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