A S BANKA ADVISORS

The Cap Table “Red Flag” Check

I’ve seen Term Sheets get pulled at the last minute, not because the product was bad, but because the Cap Table was “uninvestable.”

Founders obsess over their Pitch Deck but often ignore their shareholding structure until due diligence starts. By then, it’s expensive to fix.

If you are raising a Seed or Series A round, check for these 3 Red Flags today:

1) Dead Equity: Does a co-founder who left 2 years ago still hold 20%? No VC will invest if a huge chunk of the company is owned by someone not driving growth.

2) The “Tiny” Pool: Is your ESOP pool under 10%? Investors view this as a lack of hiring foresight. They will force you to expand it pre-money, diluting you, not them.

3) The “Crowded” Table: Do you have 15 different advisors and uncles holding 0.5% each? It’s a governance nightmare.

Your Cap Table is the DNA of your startup. If the DNA is broken, the company can’t scale.

Clean it up before you pitch.

If you’re worried about “Dead Equity” or structuring the pool, mail us at [email protected] for a Pre-Round Hygiene Check to spot these issues before the investors do.