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.

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

Holder	Shares / % before	% after this round
Founders
Existing investors
Option pool
New investor(s)
Total	100%	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