Note on Capitalization Tables for New Ventures: Figuring Out How Much Money Your Startup Needs, When You Should Raise It, and How Much It Will Cost

by: James D. Price

Publication Date: August 12, 2009
Length: 10 pages
Product ID#: 1-428-874

Core Disciplines: Entrepreneurship & Innovation

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Teaching Note

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Description

This note introduces students to the concept of capitalization tables. It defines capital requirements for startup business, helps students create capitalization tables, and provides guidance on how to plan several rounds of financing to fund a startup business.

Teaching Objectives

After reading and discussing the material, students should:

  • Analyze the capital required to launch and grow a business, and the extent to which the additional capital from each new round of financing will dilute the proportional ownership of existing shareholders.
  • Create a capitalization-planning table for dynamic capitalization forecasting.
  • Describe the current capitalization of a privately held company in a standard current capitalization table.