How Cap Tables Can Improve Your Portfolio

There are quite a few tools out there for investors and traders that deal with Excel spreadsheets. Some of them are better than others and some are extremely useful. This is usually reflected in the spreadsheet which displays the debt outstanding in a separate tab by investor type and then perhaps some sort of implied interest calculation. Of course most marketers naturally focus only on the first tab of the cap table spreadsheet which shows ownership by owner, manager, etc and for that reason it is often the starting point for negotiation. But what other functions and features could these spreadsheets provide?

For example there may be a way to quickly analyze all of the information from a cap table spreadsheet. Perhaps there is a way to sort the data by investor type. Maybe you could even get alerts when an event occurs or a trend starts or changes direction..? If so then this would allow you to better use the information contained within your spreadsheets.

Some traders ignore cap tables entirely and do not pay attention to the underlying assets or risks associated with each asset or credit risk. This is foolish and often leads to disaster. The cap table spreadsheet provides an incredible amount of information about each asset. It lists current and historical open positions as well as historical price action for each asset. And if a trader can make sense of the data then they have a much better chance of being able to correctly select future positions.

When analyzing the financial statements of startups there is quite a bit of potential to uncover information which can help improve the way one manages his or her portfolio. One example would be to learn exactly which sectors of an industry are providing strong revenue growth. Or how some sectors are lagging behind the pack in terms of growth. Then by investing in those sectors one could potentially increase the value of his or her portfolio. All of these things can be discovered by analyzing the activity in the cap table and can be used to help investors make better choices.

Of course, all of the analysis in the cap table spreadsheet is based on real time data. However, there is also an enormous amount of potential for "sleeping" the data over a period of time. This could result in missing some significant changes in the market which would have an effect on an investor's portfolio. This is why it is especially important for investors to manage their portfolios on a daily basis.

But this brings up a very good point. Even with the most thorough method of managing a portfolio there is always the chance of human error. And unfortunately with  startups  there is very little human or technical data available to the investor. They do not record their business plan, sales numbers, quarterly earnings reports, or P&L (this is a problem because many startups cannot correctly document and account for these things). Therefore the bottom line is that any potential profits from these startups might not be realized until years after they have been launched.

A cap table spreadsheet can help alleviate some of this risk by providing an easy way to track the movements of equity during the life of a particular startup. For instance, a spreadsheet can plot the price change of a particular company's equity over time. By plotting the changes in equity you can determine how the equity value of a particular startup has changed over time. This allows you to look at the relationship between the stock price and the equity value of the company. This relationship provides an indicator of the likelihood that the company will realize future profits and therefore increase the value of the equity stake.

These are just two of the many advantages that using cap tables can provide an investor with. In general, cap tables are a highly effective method of helping to diversify portfolio holdings. This is because they allow investors to take advantage of the available information about the financial performance of a company. It's also a relatively inexpensive way to perform these analysis since many of the data sources for these items are already available online. Some investors prefer to use them as standalone sheets, but there are no rules against including one or more of these tools with your overall investment portfolio. Whatever you choose, it's important to keep in mind that as a whole they don't provide the complete picture of the underlying market.