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Are digitised platforms the way forward to manage cap tables?

What is cap table management?

As you’ll know from reading our earlier blog posts, a cap table is a tabular representation of ownership and valuation information about a company. Cap tables have details about the company’s shareholders and investors, amounts invested during financing, valuation and types of shares (or other securities) issued in each investment round, shareholding percentages, and rights of all shareholders, whether founders, angels, or institutional investors. 

Managing a cap table means to make sure it’s always updated with information that’s accurate and accessible. Since the cap table often forms the single source of truth for both insiders and outsiders in a company, it’s hugely important that managing a cap table is optimised, with timely and error-free updates.

Impact of Exit on Shareholders

A company is seeded from an idea and is built on the collective skillset of a team of founders. They lay a foundation for not only a company’s business but also its culture. This culture in turn shapes the company’s employees and its growth in the long run. With one of the founders looking to exit, a question naturally arises in the minds of employees as to what happens next. Further, even short-term instability in company management, particularly when founders are involved in management, can lead to demotivated employees and a drop in productivity. 

Investors don’t escape this speculation and uncertainty either. Especially during the initial rounds of financing, an investor’s decision to invest depends a great deal on what they perceive as the founders’ potential. An impending exit of one of the founders creates doubts in the minds of the investors, which may even lead to the company struggling to raise more funds.

How Can Digitisation help in Cap Table Management?

Although traditionally crucial information such as financial data was stored in excel or google spreadsheets, there’s an increasing trend towards digitisation using special software designed for the purpose. The software is typically devised to minimise manual data entry and automate calculations in all important fields. Thus, stakeholders benefit from precise, reliable output even with minimal human input.

This approach can be extended to cap table management as well. Whether it’s because companies are raising funds more frequently or implementing intricately detailed employee stock option plans, the cap table can be an ever-changing document. Failing to update even small but critical details can have an impact on decision-making involving the company’s future. Access to cap tables is a concern for companies too – there’s a need to balance transparency with confidentiality.  

This is where a secure equity management platform comes into play.

Digitised solutions work smart

Digitised platforms are built with the idea of ‘work smart, not hard’. It’s beyond dispute that a company’s strategies and tactics set it apart from its competitors. Imagine using a platform that not only simplifies but also automates the entire process of managing data, whether updates or analyses. Now imagine you can both provide and restrict access to the data and analyses, again, automatically, and in a secure way.

Specifically, digitised equity management platforms are designed to get rid of pain points such as:

  • Disorganised data across multiple spreadsheets.
  • Complexity in forecasting and modelling information.
  • Errors that follow manual data entry.
  • Tedious statutory compliances and reporting.

What’s the edge that a digitised equity management platform can offer?

Intelligent Cap Table Management

 

  • Dashboards that accurately indicate a company’s fully diluted ownership and associated economic and legal rights.
  • Ready-to-use templates on vesting, terms of the security, etc., that are available for immediate use.
  • Multiple funding scenarios (modelling) that can be leveraged to craft solutions to suit a company’s specific needs.
  • Easy-to-use modules on compliance, to simplify process flow.
  • Transparent maintenance of data, that provides better visibility to all stakeholders.
  • Secure document vaults, that store and retrieve documents relating to funding rounds, share issuances, investors etc., facilitating easier conduct of due diligence.
  • ESOP timelines tracked in full, from plan creation to vesting and exercise of options.
  • Paperless options for various corporate actions, such as calling for meetings, share issuances, affixing signatures, etc.

Digital Equity Ownership Experience

  • Information is available in a nutshell, making its usage seamless and user friendly.

  • A suite of services is available on a single interface (right from the company’s incorporation and all other processes in the course of its continued operations).

  • Cloud-based storage and encryption assures security and accessibility.

  • The time gap between occurrence and uploading of the transaction is reduced.

  • Better analytics of cap table information is possible.

  • Domain-driven platforms allow integration and configuration with various other platforms.

Using automated platforms can be a game changer. With digitisation becoming the norm across all industries, transformation in cap table management is the need of the hour. Moving away from conventional methods of equity management can be the best investment you can make for your company today.

At RuleZero, we realised the need for such solutions and have developed an equity management platform – Hissa. With Hissa, you can store, manage, access, and share your cap table. Not only that, you can also use our single platform for various compliance-related activities, right from incorporation. For more information, you can write to us at sales@rulezero.com

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