# The cap table explained

> Who owns what, counted two ways: common and preferred, the option pool, SAFEs as converted, and pre-money versus post-money — Northwind's table before its Seed.

Source: https://lopifi.com/learn/cap-table-explained
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do you read a cap table, and what is the difference between pre-money and post-money?** Who owns what, counted two ways: common and preferred, the option pool, SAFEs as converted, and pre-money versus post-money — Northwind's table before its Seed.

A [cap table](https://lopifi.com/md/glossary/cap-table) is the register of who owns what: every share issued, every option granted, the unissued [option pool](https://lopifi.com/md/glossary/option-pool), and every [SAFE](https://lopifi.com/md/glossary/safe) or [note](https://lopifi.com/md/glossary/convertible-note) that will become shares. It is the document the board consents, the stock ledger and the balance sheet all have to agree with, and the first thing an investor's lawyer rebuilds.

> **Every percentage on a cap table is a share count divided by a total — so say which total: issued, or fully diluted.**

*[Figure: cap table]*

Northwind's cap table before the Seed, fully diluted: the founders' 8,000,000 shares, the 1,000,000-share pool and the SAFE as converted.

| Holder | Class | Shares | Fully diluted |
| --- | --- | --- | --- |
| Founder A | Common | 4,000,000 | 42.22% |
| Founder B | Common | 4,000,000 | 42.22% |
| Options granted (Priya Shah, Marcus Lee) | Options on common | 65,000 | 0.69% |
| Unissued pool | Reserved common | 935,000 | 9.87% |
| SAFE, as converted at its cap | Future preferred | 473,684 | 5.00% |
| Total |  | 9,473,684 | 100.00% |

Northwind's cap table before the Seed, from the founders' purchase, the October 1, 2026 pool, two grants and the November 2, 2026 SAFE.

## Common and preferred

Founders and employees hold [common stock](https://lopifi.com/md/glossary/common-stock). Investors in a [priced round](https://lopifi.com/md/glossary/priced-round) buy [preferred stock](https://lopifi.com/md/glossary/preferred-stock) — a series with rights common lacks, written into the charter: a [liquidation preference](https://lopifi.com/md/glossary/liquidation-preference), conversion into common, [anti-dilution protection](https://lopifi.com/md/glossary/anti-dilution-protection), [protective provisions](https://lopifi.com/md/glossary/protective-provisions) and board seats. That is why a [409A appraisal](https://lopifi.com/md/glossary/409a-valuation) prices the common below the round's price: the two classes are different securities.

— [NVCA Model Legal Documents](https://nvca.org/model-legal-documents/), The model certificate of incorporation, stock purchase, investors' rights, voting and ROFR/co-sale agreements

## Pre-money and post-money

The [pre-money valuation](https://lopifi.com/md/glossary/pre-money-valuation) is the company's price immediately before the new money; the [post-money](https://lopifi.com/md/glossary/post-money-valuation) is that plus the money. Northwind's planned Seed: $8,000,000 pre-money plus $2,000,000 is $10,000,000 post-money, so the new investors own $2,000,000 ÷ $10,000,000 = 20.00% after the round. The price per share is pre-money ÷ pre-money fully diluted shares — and what counts in those shares is the most negotiated line in a term sheet.

**Wrong:** $2,000,000 ÷ $8,000,000 pre-money = 25.00%.

**Right:** $2,000,000 ÷ $10,000,000 post-money = 20.00%.

Investment ÷ pre-money is the wrong fraction: the new money's own shares are in the denominator after the round.

> “The result is that while the safes are not diluted by each other, the safes will be diluted by the new money raised in the Equity Financing.”

— [Y Combinator, Post-Money SAFE User Guide](https://www.ycombinator.com/documents), What “post-money” means: post the SAFEs and the old pool, not the round's new pool

**A spreadsheet**
- Pro: Free, and anyone can read it
- Pro: Easy to model a round before it happens
- Con: No link to the documents that make each line true
- Con: Conversion math done by hand, and redone by every reader
- Best for: Two founders and nothing else

**Cap table management software**
- Pro: Holds the documents beside the ledger
- Pro: Models SAFE conversion and rounds; issues and tracks option grants
- Con: A subscription, and data entry that must match the signed documents
- Con: Only as right as what was entered
- Best for: From the first option grant or the first SAFE

**Kept by company counsel**
- Pro: The person drafting the consents keeps the ledger
- Pro: Diligence-ready by construction
- Con: Slower to change, and billed by the hour
- Con: Modeling still happens somewhere else
- Best for: Companies whose counsel already keeps the minute book

Where the cap table lives. Categories, not vendors — any of them is fine if it agrees with the signed documents.

In this lesson: fully diluted versus outstanding, with Northwind's table both ways.

## Pages in this lesson

- [Fully diluted versus outstanding](https://lopifi.com/md/learn/cap-table-explained/fully-diluted-vs-outstanding-shares) — 4 min. What does fully diluted mean on a cap table?

## Where this lesson's rules come from

- [Y Combinator, Post-Money SAFE User Guide](https://www.ycombinator.com/documents) — What “post-money” means: post the SAFEs and the old pool, not the round's new pool (reference)
- [NVCA Model Legal Documents](https://nvca.org/model-legal-documents/) — The model certificate of incorporation, stock purchase, investors' rights, voting and ROFR/co-sale agreements (reference)
- [Wikipedia, “Capitalization table”](https://en.wikipedia.org/wiki/Capitalization_table) — The cap table — background (reference)

## Read further

- https://lopifi.com/md/accounting/cap-table
- https://lopifi.com/md/accounting/option-pool
- https://lopifi.com/md/accounting/priced-round

- **Track:** [Cap tables & raising](https://lopifi.com/md/learn/equity)
- **Lesson:** Lesson 2 of 10 — 9 min
- **Terms taught:** [Cap table](https://lopifi.com/md/glossary/cap-table), [Fully diluted](https://lopifi.com/md/glossary/fully-diluted), [Common stock](https://lopifi.com/md/glossary/common-stock), [Preferred stock](https://lopifi.com/md/glossary/preferred-stock), [Pre-money valuation](https://lopifi.com/md/glossary/pre-money-valuation), [Post-money valuation](https://lopifi.com/md/glossary/post-money-valuation), [Option pool](https://lopifi.com/md/glossary/option-pool)
- **Previous:** [Single- and double-trigger acceleration, Cap table · Lesson 1](https://lopifi.com/md/learn/founder-stock-and-vesting/single-and-double-trigger-acceleration)
- **Next:** [Fully diluted versus outstanding](https://lopifi.com/md/learn/cap-table-explained/fully-diluted-vs-outstanding-shares)
- **The course:** https://lopifi.com/md/learn