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: 11 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:

  • think through how much money they will need to raise and when
  • calculate the amount of startup capital required and when
  • build a capitalization planning table
  • how startup capital needs are often raised in multiple rounds and why
  • how and why those rounds are priced differently, and how shareholder dilution works
  • the cap planning table, which provides readers with a powerful scenario planning tool for trying out various money-raising pricing
  • shareholder dilution scenarios.