Cap table management errors and confusion are a huge problem for the VC / Startup community. From founding your company to the exit, you have to be able to fully comprehend your company ownership and understand changes during new rounds of financing or exits.
Many have heard about virtual data rooms as an essential component to a due-diligence process and indeed they are in use across numerous industries. Typically, data rooms are implemented as part of a due diligence process that arises when a company is looking to either be sold or raise money from outside investors. Data rooms are relatively simple to set up and allow management and other key employees to share important information with those outside the company. So, if traditional data rooms are easy to set up and effectively manage due diligence material, what’s wrong with these solutions? The simple answer is a lot. Today we’ll discuss two of the major issues associated with traditional data rooms.
If you don’t know where they are, or who has it, you better go find it!
If you are a private equity, venture capital or an investment backed startup, you know that maintaining secure communication with your limited partners can be very time consuming and error prone. Fully integrated solutions can be very expensive for most funds/companies. How do you store and share investor specific documents such as capital calls, return of capital, K1s, fund updates or due diligence material? Most companies/funds are looking for easy-to-use, secure and affordable method to streamline investor communications; they need a simple solution, which can assure that these documents are securely distributed to the appropriate investors.
You won’t find any security labeled “rollover equity” on a cap table, yet rollover equity is quite common. Typically, rollover equity is the product of the following three things: