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cap-table-explainer

Explain a cap table, dilution, SAFEs, option pools, and round mechanics in plain English with the actual math. Use when asked to explain dilution, model a SAFE or priced round, size an option pool, understand a term sheet's economics, or figure out who owns what after a raise. Produces a worked ownership breakdown before/after the round, the dilution math step by step, and the traps founders miss. Not legal or financial advice.

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Cap Table Explainer Skill

Dilution math quietly decides how much of your company you keep. This skill walks through it with real numbers — pre/post-money, SAFEs, option pools, and conversions — so the founder sees exactly who owns what and why. Not legal or financial advice; confirm with counsel before signing.

Working from a brief

Given partial terms, work the full example anyway with the numbers provided, and clearly state every assumption (e.g. assumed $1M pre-existing on a $X pre-money). If numbers are missing, pick clean illustrative ones and label them. Never leave the math as "[calculate]".

Required Inputs

Ask for (if not already provided), else use labelled illustrative figures:

  • Current ownership (founders %, existing investors, current option pool)
  • The round: amount raised, pre- or post-money valuation, instrument (priced equity, SAFE, convertible note)
  • SAFE/note terms if any: cap, discount, MFN
  • New option pool target, and whether it's pre- or post-money ("the pool shuffle")

Output Format

1. Plain-English summary

What this round does to ownership, in 3 sentences.

2. Ownership before → after

HolderShares / % before% after this round
Founders
Existing investors
Option pool
New investor(s)
Total100%100%

3. The math, step by step

  • Post-money = pre-money + amount raised (or the reverse for post-money SAFEs)
  • New investor % = amount ÷ post-money
  • Show SAFE conversion (cap vs discount — whichever is better for the investor) explicitly
  • Show the option pool shuffle: a "pre-money pool" dilutes founders, not the new investor — quantify it

4. What this costs the founder

The single dilution number that matters, and the one term quietly driving it.

5. Traps & watch-outs

  • Pre-money option pool (dilutes you, not the VC)
  • Stacked SAFEs converting at once (often more dilution than founders expect)
  • Liquidation preferences / participation (economics ≠ ownership %)

Quality Checks

  • Before/after table sums to 100% both columns
  • SAFE conversion uses the investor-favourable of cap vs discount, shown explicitly
  • The option-pool shuffle is quantified, not hand-waved
  • Includes the "not legal/financial advice — confirm with counsel" disclaimer

Anti-Patterns

  • Confusing pre- and post-money (the most common, most expensive error)
  • Ignoring the option pool's dilution effect
  • Treating ownership % as the whole story while ignoring liquidation preferences
  • Presenting math without stating assumptions

Example Trigger Phrases

  • "Explain dilution."
  • "Model a SAFE."
  • "Size an option pool."
  • "Understand a term sheet's economics."
  • "Figure out who owns what after a raise."

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