Incorporate your startup in the appropriate jurisdiction.
Create an Equity Incentive Plan to compensate your advisors, employees and partners with the most valuable asset that you hold - your equity.
Pick an easy to use participatory platform that allows you to collaborate with a counterparty to verify every transaction.
Cap table errors are a natural side effect of a manually recorded ledger without counterparty verification.
Every stock certificate, option grant, exercise, transfer or convertible note issue is a transaction that updates the cap table.
Record convertible notes.
Convertible notes are rarely recorded in a cap table, but staying on top of this will save you time, expenses and unpleasant surprises when you raise a conversion triggering equity round.
Keep track of stock options and vesting schedules.
Typically, options to buy stock will vest over time, so you need to keep track of how many shares have vested for every option grant.
Company employees and your fellow founders will be grateful to have clarity over this.
Record basic share information such as who the shareholders are, how many shares they have and what percentage of the company they own.
Start a central repository. Having a central repository for legal documents and shareholder reporting helps avoid lost documents, conflicting records and makes it easy for everyone to access information when needed.
During a legal due diligence process this can save you days of work and stress.
Keep everyone on the same page by sharing your cap table regularly.
Specifically make sure that the relevant parties agree on the accuracy of this information, and that they are able to see an audit log of all changes to the cap table. The last thing you need is an internal dispute during a financing event.
Don’t overcomplicate your cap table.
It should be easy to read and understand with supporting documents and commentary where necessary to make the information self-explanatory.
Don’t turn the responsibility for maintaining the cap table over to someone without clearly defining this role.
Ultimately, the founder is responsible for all aspects of the business.
Never lose track of your shareholders’ information.
Make it is clear to investors and employees that they must inform you of a change of address. Losing information can cause major delays in a merger or IPO situation and could jeopardize the deal entirely.
Lastly, don't succumb to creating an inaccurate cap table with the intention of fixing it later.
The problems will only compound, and fixing it later will be much more costly and difficult to manage.