How to Read a Cap Table Before You Sign
A practical walkthrough for reading an early-employee or co-founder cap table, and the four numbers that matter more than your headline equity grant.
By The Internet Compass Editorial Team — Growth & Discovery Desk
The headline number is never the real number
An offer letter quoting "0.5% equity" is quoting a fraction of the current share count, not a fraction of the company you'll actually own. The number that matters is fully diluted ownership: what that grant is worth after every outstanding option, SAFE, and the option pool itself convert into shares.
The gap between the headline and fully diluted figure is almost always in the company's favour, because it's the company doing the quoting. Ask for the fully diluted percentage directly — a company confident in its numbers will give it to you without friction.
Read the cap table in this order
A cap table has a lot of rows and most of them aren't relevant to evaluating your own offer. The following sequence gets to what matters fastest.
- 1
Find your fully diluted percentage, not your nominal grant
Ask HR or the founder directly for your ownership as a percentage of the fully diluted share count, including the current option pool and any outstanding SAFEs or notes not yet converted.
- 2
Check the liquidation preference stack
Look at every preferred share class ahead of common stock and note the multiple (1x is standard) and whether any class is participating. This determines what's actually left for common holders in a modest exit.
- 3
Find out when the option pool was last topped up
A pool refresh planned for the next round will dilute your grant before it's fully vested. Ask whether one is expected and how large it's projected to be.
- 4
Confirm your vesting schedule and cliff explicitly
Standard is four years with a one-year cliff, but terms vary. Get the exact start date, cliff date, and whether any acceleration applies if the company is acquired.
- 5
Model at least two exit scenarios, not one
Run the numbers at a modest exit (where liquidation preferences bite hardest) and an optimistic one. The gap between the two tells you how much of your equity's value depends on a best case.
Preferred stock changes the math more than most people expect
Common stock — what employees typically hold — sits behind every class of preferred stock in the payout order. In a strong exit this rarely matters; in a modest one, preferred holders can be made whole while common holders receive very little, purely because of where they sit in the stack, independent of the company's actual outcome.
This is why the liquidation preference terms of the company's most recent round matter more to an employee's equity value than the headline valuation the round was announced at.
Early-stage instruments complicate the picture further
If the company has raised on SAFEs or convertible notes that haven't converted yet, your fully diluted percentage isn't fixed — it depends on the terms (valuation caps, discounts) of instruments that will convert at the next priced round, often in ways that are hard to model without seeing them.
This isn't a reason to avoid an early-stage offer, but it is a reason to treat any pre-priced-round equity percentage as a rough estimate rather than a fixed number, and to revisit it once the company's next round actually prices.
Frequently asked questions
- What's a reasonable equity grant for an early employee?
- It varies enormously by stage, role and company, and there's no single defensible benchmark — what matters more than the number itself is understanding it on a fully diluted basis and modelling it against realistic exit scenarios, using the steps above.
- Can a company legally refuse to share cap table details?
- Private companies generally aren't obligated to share their full cap table with a prospective or current employee, though many will share your own fully diluted percentage and the relevant liquidation terms on request. A consistent refusal to answer these specific questions is itself informative.