We had a great response to the SaaS cap table survey in our April newsletter.  ConnectWorks are analysing the results, and will let us know whether there was enough interest for them to add a cap table module to their company secretarial platform.

In the meantime, we’ve created version 2 of our own template cap tables. There are two templates:

• cap table with discounted debt conversion – for use where the company has KISS notes or similar that convert debt to equity at a discount to a subsequent equity financing
• cap table with no discounted debt conversion – for use when the company has no convertible debt, or only debt that converts at the same price as the subsequent financing.

The main change between version 1 and and version 2 of these tables is the treatment of employee share schemes (ESOPs).

Most tech company financings provide for the establishment of new, or enlarged, ESOPs.  Version 1 of the cap tables took a founder friendly approach to the treatment of these plans, by spreading the  dilution caused by the ESOP equally across all shareholders.

However, NZ market practice has now largely settled on the use of fully diluted pre-money valuations.  This means that the dilutive impact of a new or enlarged ESOP is applied to existing shareholders only, not to the new investors (or converting note holders).  Version 2.0 of the template cap tables reflects this approach.

Here is a quick example of the difference, assuming an investment of $1m, a pre-money valuation of $4m, and the creation of a 10% ESOP as part of the round: