Cap tables and dilution

A cap table decides who gets paid in an exit, who controls votes, and what an employee's 0.4% grant is worth after the next two rounds. It is not a fundraising artifact. Founders who leave it to Carta and the lawyer discover they sold more than they thought, or that a messy SAFE stack made Series A impossible to close. Engineers need the same model: your shares only mean something relative to fully diluted shares.

Concept

Dilution is new shares. Your count stays put; your percent falls because the denominator grows. The hope is the pie got larger in dollars. See how dilution works.

Read these pages in order. Each one is a piece of the same Northwind story.

Step	Concept	What it answers
1	Fully diluted ownership	1% of what — outstanding or fully diluted?
2	How dilution works	What does `(1 − new money %)` do to your stake?
3	Walking a cap table	How do two stacked SAFEs move founder %?
4	Series A on the cap table	How do conversion, the pool and pro-rata land?

Hygiene that prevents Series A pain

Spreadsheets work through seed if you are disciplined: one tab per financing, immutable snapshots, one current FD denominator. Mistakes compound silently.

Carta, Pulley, AngelList Stack and similar systems earn their keep with dozens of stakeholders, 409A updates, exercise requests and a diligence export.

Rules:

One source of truth. Do not let the lawyer's Word table diverge from Carta.
Model every SAFE and note with amount, cap, discount and MFN — not a single "convertibles" blob.
Never grant options above the reserved pool. Expand with board approval first.
Record cancellations when people leave unvested — available pool should go up.
Before you sign a term sheet, build the proposed post-money table and look at founder %.

Warning

Verbal "you'll own X%" promises that ignore the unissued pool or the next raise create angry diligence later. Always quote fully diluted and say that future rounds dilute further.

As an early engineer you may never edit the official table. You will still ask for total FD and your grant size, estimate dilution to Series B when comparing offers (a 0.5% seed grant is not a 0.5% exit grant), and notice an empty pool — refresh means your grant dilutes too, or hiring freezes.

Common mistakes

Dual sources of truth. Carta says one thing, the counsel table another, and the deck a third.
Treating the queue of SAFEs as one line. Different caps and MFNs convert differently. See SAFE conversion math.
Granting through an empty pool. That is either unauthorized dilution or a hiring freeze.

Key takeaways

Ownership is shares ÷ fully diluted shares. Outstanding-only percentages lie.
Each round multiplies existing ownership by (1 − new investor post-money %); pool expansions dilute again.
Post-money SAFEs lock % = investment ÷ cap and stack before you celebrate founder control.
Pro-rata lets investors buy enough of the next round to hold ownership; founders rarely get that without cash.
Keep one clean system of record. Messy convertibles and phantom pools kill financings.