Looking for a scenario to justify ditching spreadsheets? How about this one?
- “We’re sorry, your data cannot be recovered.”
It’s the stuff of CEO nightmares: losing data due to a small slip of the finger on the mouse. Getting hacked and losing confidence in critical information about shareholders.
If you’re a CEO or tasked with funding a growing company, there’s no reason you should be manually updating information about equity. We’re in an era where we get our Amazon orders in a few hours and have endless information at our fingertips. Technology that supports automation is the next step in growing your business.
In addition, as more and more employees work from home, data privacy is more important than ever. As privacy needs grow, so do solutions. For example, you don’t need to trust a bulky spreadsheet with shareholder information about your company on a shared drive.
Finally, as entrepreneurs look to invest heavily—taking advantage of a down economy to build for the future—keeping perfect equity-related records is vital. This can be more complex than ever as founders look for creative ways to secure funding in a loud, crowded ecosystem.
Ditch spreadsheets. They’re on their way out. Software company Astrella has a better solution.
Featured Partner for Workplace Productivity
on Monday's website
Replacing the Manual Cap Table
One of the most basic, important documents or data hubs for any startup or established business is its cap, or capitalization, table.
The cap table is essentially a list of all the shares and securities in the company. Stocks, warrants, convertible notes, and equity grants all show up here. In addition, rounds of funding, investor information, and more are stored within the table.
Stakeholders should be able to look at the cap table and understand how they would fare in a liquidation event. They should understand the impact of new rounds of funding, including the types of options offered. The table quickly and clearly shows how ownership of the company changes as more investors come on board.
5 Benefits of Using Software Designed for Cap Tables
You wouldn’t pull a sand wedge for a long drive. You wouldn’t don ski goggles for a deep sea dive. So also, you wouldn’t use a basic spreadsheet—something that looks like a cap table but isn’t designed for the same functionality—to track your company’s funding.
Here are a few of the specific benefits of ditching spreadsheets and using software that’s designed for optimal cap table functionality.
1. Scale as your company scales.
Astrella offers software that works for any size company, anywhere in the world.
Is your father your sole investor right now? If you plan to grow your company, you’ll need to be sure to track his share in the company as you raise more funds.
Do you have dozens of investors who each joined at different phases and under various promises? Naturally, you don’t want the liability of shoddy records when it comes time to pay dividends or go public.
In order to build a secure foundation for your growing business, you need a software solution that is smart enough to scale with your company.
Yes, Excel seems cheaper than a cap table, which might be until there is an issue. Not to mention that managing cap table software like Astrella is easier than hiring a lawyer to manage your firm’s equity.
2. Secure your data with blockchain technology.
The beauty of blockchain, the technology used to keep track of cryptocurrency, is that each transaction comes with an irreversible timestamp, which means no one can alter it surreptitiously.
This offers security to your investment information—no one can hack your system and edit ownership numbers. It also protects your data from errors from unknown sources.
In an era where technological advancements are outpacing security, using a secure software system—rather than a spreadsheet, even on a local drive—is like installing better locks on your home. It’s just brilliant.
3. Impress potential investors.
Your cap table doesn’t just matter to your current investors—it can be used as a tool to either attract or scare away potential investors.
A poorly kept cap table can reveal sloppy business ownership tactics that would make investors shy away. Clerking errors, incorrect formulas, and just plain, lousy formatting are all potential red flags.
In addition to bad record-keeping, a cap table can reveal various issues to a potential investor. Weaknesses such as having the wrong person own the wrong share in the company (like an investor who came on early for a tiny sum or an investment via a handshake deal that wasn’t recorded properly) become obvious when you look at your cap table.
You need a good cap table to identify your own areas that need solving, as well as shining for investors.
4. Administrate your stock with ease.
A good cap table is more than just a record of money-in.
A spreadsheet won’t cut it when you have complex payout and valuation models. However, Astrella has built all the management tools into its software—all you need to do is enter your ownership information.
In addition, software specifically designed for cap tables can help businesses stay in compliance with financial regulations. As a result, you can ditch spreadsheets and avoid many headaches down the road.
5. Project your company’s future.
Even the best software can’t actually predict the future, of course. But it can make projections, helping you, as the CEO, understand where you came from and where you’re going.
AI can provide forecasts and analytics that help business leaders make smart decisions about growth, fundraising, personnel, and more.
Featured Partner for Workplace Productivity
on Monday's website
Moving Into the Future with Smart Cap Tables
A few trends, or at least opinions, in investing that make cap tables more critical than ever.
- One is a push to democratize investing, making venture capital (VC) available to more startups without the pressure of the traditional growth-first VC mindset.
- Another is VC investing in individuals rather than corporations.
- Yet another is offering marketing partners such as influencers a stake in the company as part of their promotion deal.
Consider the last example: A small, dynamite shoe brand partners with an Instagram influencer who has a following of two million. That influencer negotiates a brand partnership where they own 1% of the company, in addition to a cash payout based on conversions. As a result, the shoe brand grew exponentially, and five years later, it went public.
Without a good cap table and an understanding of that influencer’s place in the company’s payout schedule, multiple legal and business problems could ensue.
Software like Astrella can make that situation as easy for a tiny startup as for a behemoth private equity firm. Ditching the spreadsheet has never made so much sense.
Image Credit: Lukas; Pexels; Thank you!
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