How do I build a pro forma cap table for a round?
Cap tableFundraisingValuationEquity
A pro forma cap table is your cap table as it will look the day after a round closes, and you build it in four steps in a fixed order. Take the fully diluted table as it stands today. Convert the outstanding SAFEs and notes into shares at their caps and discounts. Enlarge the option pool to whatever the term sheet requires after the round. Then issue the new preferred stock at the price those three steps imply. The order matters because each step changes the denominator the next one is priced against, and a term sheet's pre-money valuation is normally defined to include the second and third steps before the fourth.
Step one: today, fully diluted
List every holder of common stock with their shares, every option granted, and the unissued shares left in the plan. That total is the fully diluted count before the round, and it is the number the price per share divides into. A table that leaves out the unissued pool or a forgotten advisor grant produces a price that is wrong by that amount.
Step two: the convertibles
Each post-money SAFE converts into a fixed percentage of the company immediately before the round: its investment divided by its cap, calculated as if it were the only SAFE. Add those shares. A note converts its principal plus accrued interest at the lower of the capped price and the discounted price. A pre-money SAFE or note is calculated off the pre-round share count instead. This step is where founders discover what their seed round cost, because the shares appear here and dilute the founders before a single new investor is priced in.
Step three: the pool
The term sheet will say the pool is to be some percentage of the post-money fully diluted capitalization, and that the pre-money valuation includes it. Add enough shares to the plan to reach that percentage after the round. Because they are added before the new shares are priced, they dilute the existing holders only.
Step four: the new money
Price per share is the pre-money valuation divided by the fully diluted shares after steps two and three. The investors receive their investment divided by that price. Now read the final column: each founder's percentage, the investors' percentage, the pool. That is the deal. Run it again for the other term sheet, and again for the next round at a plausible valuation, because the number that matters is not this round's percentage but what it becomes after the next one.
Arabella members can run this in Venture Math, our pro forma model: enter each round's size, valuation and pool target, with the pre-seed money as a SAFE, and read the founders' ownership after every round and what it is worth at a range of exit values.
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Written by the lawyers who built Arabella. This is legal information, not legal advice for your situation, and reading it does not make us your lawyers. For a real dispute or a high-stakes decision, talk to a licensed attorney. More questions.