A capitalization table, or more commonly referred to as a cap table is a spreadsheet that contains the current list of all shareholders, including founders, key employees, investors, and employee stock ownership plans, and their respective ownership of shares or securities, including common stock, preferred stock options or warrants, and the value assigned to their ownership. There are several purposes of a cap table. Firstly, the founders and employees of a company will want to document and track their ownership percentage and any dilution that comes from capital raising. This will need to be updated each time a new round of capital is raised and also when any other dilutive event occurs. The second reason is that potential new investors who are considering making an investment in the company will want to understand the company's equity ownership profile. The cap table will tell them the percentage ownership that each investor has in the company, and also the conversion terms of any convertible preference shares. The implied valuation of the overall company is also included within a cap table. This will all need to be carefully considered by potential new investors before they make any investment decision. Finally, all of the shareholders in the business want to understand what their ownership might be worth at Exit. The cap table will detail each shareholder's ownership percentage in the business, how this percentage ownership has been impacted by each new funding round, and also how much each shareholder's percentage ownership could be worth at the time of an exit if there was to be no further dilution of their equity stake. Dilution refers to the reduction of the percentage ownership stake of each shareholder. Whenever new shares of the company are issued. Think of the company ownership as one big pie at the start of the company's life. The founders own 100% of that pie, but each time new shares are issued to new investors or new employees or new advisors, they each receive a slice of the pie. The founders must share the pie with others, and each time they do, they will see their ownership percentage reduce, or in other words, they'll see their ownership diluted. The earlier someone joins or invests in the company, the more they will be diluted as each subsequent dilutive event, such as a funding round occurs. This means that the founders of a company are impacted the most by dilution, and therefore are highly sensitive to changes in their ownership stake and very protective of the number of shares they distribute to others. Every time a dilutive event occurs, the founders and all of the other existing shareholders on the cap table at that time will typically get equally diluted. There are a few exceptions, such as certain securities sometimes having special anti-dilution rights, or if a down round occurs.