A capitalization table starts as a short list of founders and their percentages. Within a few years it commonly contains errors that take weeks and legal fees to reconstruct.
Instruments that have not converted still count
Convertible instruments and warrants represent future shares whose number depends on events that have not occurred, such as a priced round at an unknown valuation.
They do not appear as issued shares, so a table listing only outstanding stock understates dilution, sometimes substantially.
Fully diluted calculations are what investors and acquirers use, and the difference between the two views is where founder expectations are usually disappointed.
Option pools are counted before they are granted
Investors typically require a pool of unissued shares reserved for future hiring, and expect it to be created before their investment rather than after.
That timing places the dilution on existing holders, which is why the size of the pool is a negotiated economic term rather than an administrative detail.
Unallocated pool shares remain in the fully diluted count, so a large unused pool dilutes founders whether or not the hiring happens.
Informal promises create real obligations
Early companies frequently promise equity to advisors, contractors and early employees in conversation or email without board approval or executed documents.
Those promises can be enforceable, and they surface during diligence when a buyer's counsel reviews correspondence.
Resolving them late usually costs more than granting properly at the time, because the claimant's leverage is greatest when a transaction is pending.
Records diverge from the legal documents
The authoritative record is the set of board consents, stock certificates, option agreements and the stock ledger. A spreadsheet is a summary of those documents.
Divergence occurs when grants are made without documentation, vesting is modified informally or transfers are recorded in one place only.
Reconciling the summary to the underlying documents is a standard diligence exercise, and discrepancies delay closings and can reduce the price.
Vesting and departures complicate the picture
Departing employees hold vested options with exercise windows, and whether they exercise changes the share count and the number of individual shareholders.
Repurchase rights, acceleration provisions and extended exercise periods all vary between grants, so two employees with identical grant sizes can end up in different positions.
Because securities law, corporate approval requirements and tax treatment all apply and vary by state and structure, cap table maintenance belongs with corporate counsel rather than with a spreadsheet owner.