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Key takeaways
- Cap table due diligence is the investor's verification that a company's documented ownership matches signed, authorised, and filed records before capital is committed.
- Investors price a round on fully-diluted ownership, which counts issued shares plus granted options, the reserved option pool, SAFEs, convertible notes, and warrants.
- The core checklist covers share classes and rights, SAFEs and convertibles, option pool size and grant, documentation, the 409A valuation, board and shareholder approvals, and vesting and leaver terms.
- Preparing for due diligence means building a fully-diluted view of the cap table, confirming every issuance and grant has its approval and documentation, and checking 409A coverage.
- Due diligence depth increases by stage because later-stage cap tables carry more rounds, share classes, and option history to reconcile.
What cap table due diligence verifies
A capitalization table, or cap table, is the record of who owns a company and in what proportion: founders, investors, employees holding options, and anyone holding a convertible instrument.
Due diligence comes down to one question about your cap table: does the ownership the company claims match documents that are signed, properly approved, and up-to-date? The investor's job is to confirm the answer is yes.
The ownership number investors actually use
Every company has two ownership figures:
- Issued ownership counts only the shares the company has actually handed out.
- Fully-diluted ownership counts those shares plus everything that could still turn into a share: options already granted, options set aside in the pool but not yet granted, and any SAFEs, convertible notes, or warrants still outstanding.
Investors care about the fully-diluted figure, because it shows what they will really own once all of that converts. Issued ownership only describes where things stand today.
The two numbers can be far apart. Founders might hold 60 percent on an issued basis. But add a 15 percent option pool and a few SAFEs, and the fully-diluted picture can look very different.
Cap table due diligence checklist
Share classes and their rights
The investor gets a view of each class of shares (usually common and one or more series of preferred) and the rights attached to each: voting, liquidation preference, and similar protections. These existing rights sit ahead of or alongside what the new investor is about to negotiate, so they need the full picture before they start.
SAFEs and convertible notes
The investor reviews every SAFE and note with its cap, discount, and amount, alongside the share classes, to get the complete fully-diluted picture. These instruments sit in the count from the date they are signed; the number of shares each becomes is fixed only when a round prices.
Option pool and grant paperwork
The investor checks the option pool size, how much is granted, and whether each grant has board approval and a signed letter behind it. An unallocated pool also matters, because under the standard pre-money convention it dilutes the incoming investor, not the founders.
409A valuation
The 409A valuation sets the fair market value that options must be priced at, so it supports the strike price on every grant. It stays valid for a maximum of 12 months, and a material event such as a new financing round resets that clock sooner. The investor checks that a current, valid valuation covers each grant, since a grant made against an expired or missing report has an unsupported strike price.
Prior-round rights
The investor reviews rights held by earlier investors, especially pro-rata rights, which let them keep their ownership percentage by investing in future rounds. These decide how much of the current round is actually free for the new investor.
Documentation
The investor checks whether any side letters, special rights, or preferential terms have been granted to specific investors outside the standard offering documents. These arrangements affect economics and governance but may not appear in the shareholders' agreement or the cap table.
Board and shareholder approvals
The investor confirms each issuance and grant carries the approval it needed at the time. Individual issuances and option grants are board approvals, while bigger steps like enlarging the option pool or creating a new share class also need shareholder sign-off. An issuance made without the right approval can be challenged later, which puts that ownership in doubt.
Vesting and leaver terms
The investor reads the vesting schedules and the leaver terms that determine what happens to equity when someone departs. A fully vested founder with no leaver mechanism is a concern, because none of that equity is recoverable on departure and the idle stake reduces what remains to motivate the team.
How to prepare your cap table before investor due diligence
1. Have the fully diluted cap table view. Have the fully-diluted cap table view ready. Pull issued shares, granted options, the reserved pool, and all convertibles into a single calculation. Model how SAFEs and notes convert at your expected next-round valuation so you are working from the same numbers the investor will check.
2. Confirm every issuance and grant is documented. Confirm every issuance and grant is documented. Locate the board consent for each share issuance and the signed grant agreement for each option grant. A grant promised verbally but never recorded should be documented properly or removed before the review begins.
3. Make sure every document is complete and ready. Board and shareholder resolutions, option grant letters, SAFE and convertible note agreements, and the share register should be assembled and consistent.
EquityList maintains an audit-ready record of equity events and links board and shareholder consents to the grants they authorise. Because every event is timestamped, the cap table can be produced as it stood at any past date, which is the reconciled, point-in-time view an investor asks for during diligence.
How cap table due diligence differs by funding stage
The items an investor checks stay broadly constant across stages. What changes is depth, and the reason is simply that there is more history to reconcile as a company matures.
a. At seed stage, the cap table is usually short: founders, perhaps a few angels, an option pool, and some SAFEs. Review is quick because there is little to verify, and the investor's attention sits on founder ownership and the terms of any early convertibles.
b. At Series A, the company has a priced round or several SAFEs behind it, a populated option pool, and possibly some employee departures, so the investor spends more time reconciling grants, leaver outcomes, and convertible conversions.
c. At Series B and beyond, the cap table carries multiple priced rounds, several share classes with layered rights, and years of option activity, so diligence on prior-round rights, share-class preferences, and the completeness of historical approvals becomes substantially heavier.
The preparation principle holds at every stage. The cleaner and more continuously maintained the record, the faster the review, and the difference compounds as the cap table grows.
FAQs on cap table due diligence checklist
What should be included in a cap table?
A cap table should list every shareholder and the number and class of shares each holds, all granted stock options and the size of the option pool, and every outstanding SAFE, convertible note, and warrant. It should also record the issue date and the board or shareholder approval behind each entry, so that ownership can be reconciled to the company's official filings.
What should be included in a cap table due diligence checklist?
A cap table due diligence checklist should cover ownership reconciliation against the official share register, share classes and their attached rights, option pool size and grant documentation, outstanding SAFEs and convertible notes, pro-rata and other prior-round rights, board and shareholder approvals for each issuance. Each item confirms that the documented ownership is complete, authorised, and verifiable.
