How to Construct an Equitable Cap Table

TechCrunch42min

Alex Wilhelm

00:00

Hello, everybody. I am back. And we are going to have an absolutely amazing next session about how to construct an equitable cap table when we talk a lot internally about a TechCrunch plus is how diverse the venture capital world has become how global that means that founders these days really can select from whom they take money from and also from whom they may actually enrich with their work. So picking your cap table is no small matter and we're gonna have a great session about that right now. We have Ashley from coalition operators, Robbie from Cowboy Ventures and Richie from the FinTech Phenix and both Bobby and Ritchie will be in the TechCrunch plus lounge afterwards for more questions. Please welcome the crew and your moderator Rebecca Szkutak.

Rebecca Szkutak

00:46

Oh, I forgot to spray. I forgot to say who founder chooses to back their company is an incredibly important decision. They want to find a group that is both equitable aligns with their values and also will be beneficial to the growth of the actual startup. But of course, building an equitable cap table is easier said than done, especially in today's funding environment. Looking at stats from PitchBook funding in q2 of this year is down nearly 50% from q2 of 2022, which as we all know, was down from 2021. And yet building an equable cap table is still something that is just as important, even if it's a little bit harder for founders to sort of achieve that. So thinking about how do you build an equitable cap table? Starting with you, Robby, I know when we talked about this a couple of weeks ago, you mentioned who do you want to be making money for, as something founders should really be thinking about when they're talking with potential investors and looking to build out that cap table. So asking you to start, why does it matter? Why should founders care about this? Why should startups think about this when fundraising is just so hard as it is?

Robby Robson

01:56

As of now? Great question. And I want to start by just kind of level setting on what is a cap table, what does it represent? So cap table represents all of the people who have equity interest in your company. And historically, that group has been pretty homogenous on the investor side. And on the investor side that's really talking about the funds that are backing you but also a lot of companies will have a number of angel investors that also back them and ultimately when startups are successful, everybody who is on the cap table, I will benefit from it because they have ownership in the company. And one of the things that prompted me to want to build modern angels, which we'll talk a little bit more about later. It's a network of diverse operators and female non binary operator angels is I saw cap tables that really successful companies that are very homogenous. And what that means is that the people who are benefiting from the startup ecosystem are people who are not from diverse backgrounds. So all of the benefits of what Silicon Valley offers ultimately ends up going to a group that doesn't look very diverse or different.

Rebecca Szkutak

03:00

And sort of going off of that for a moment definitely makes sense to think about sort of which investors are going to make money but for the actual founders for startups themselves. Why does this also matter for them? Maybe if you want kick that off, Ashley

Ashley Mayer

03:15

Yeah, that's gonna say and Richie is the perfect candidate to talk about this because he is in the founder seat and has been really intentional about this be I think Robbie talked about sort of the ecosystem impact of diverse cap tables right that people who win and win with you are going to go and put that wealth to work in the startup industry. That's one of the best things about the tech ecosystem is that people who make money here tend to put it back in. And if that's a more diverse set of people, I think we can believe it's going to they're going to invest in a more diverse set of companies, they're going to Mass a more diverse set of fund managers. And so there's this really amazing flywheel. effect. But before we can even get to like the ecosystem might impact. You have to have a successful startup. And so I think like the most important thing is to start with what is going to be most beneficial to a founder. So especially in the early stages, and especially in this economy, where you're being asked about much more efficiently with smaller teams, I cap tables and opportunities to build an incredible bench of people around you and people that you wouldn't be able to hire directly. And so having a diverse, diverse cap table in that context means having access to a diverse range of skills that are going to be super impactful for you as you grow, having access to diverse talent networks, as you build your team, having the signal of people who have really strong reputations and categories and with audiences that you care about. And so having a strong cap table makes you just that much more likely to make it to your next funding round to achieve product market fit to reach profitability. And so you can think of it as like an extended team of people who are there to support you, and people who you wouldn't be able to work with in a traditional employment structure

Rebecca Szkutak

05:12

in which you you are living this today. So how did you think about building your cap table and what was your approach like? Yeah,

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