Cap table

A capitalisation table is not a list of percentages. It is a list of share counts, and every percentage anyone quotes is a quotient computed from it at a moment in time.

Three columns matter. The share count, the price per share paid for it, and the class. Everything else, including ownership percentage, is derived. This sounds pedantic until the first down round, when percentages stop being additive and only share counts still behave.

What is a fully diluted share count?

The denominator is where the arguments live. Fully diluted share count includes issued common shares, all preferred on an as-converted basis, every option granted whether vested or not, every option authorised but not yet granted, and every warrant and convertible note that would convert at the relevant price. Excluding the ungranted pool from the denominator is the single most common way a founder's quoted percentage differs from the one the investor's model shows, and it is why the pool convention in the next section is worth ₹90 lakh.

Anantara Labs Private Limited (synthetic) is a Bengaluru logistics-software company. Two founders hold 13,000,000 shares between them, split 7,800,000 and 5,200,000, and there is nothing else outstanding.

Those two lines are the whole cap table on the morning the seed term sheet arrives, and they stay the anchor for the next four sections.

Price per share is the mechanical link between a valuation and a share count, and it works in one direction only:

price per share = pre-money valuation ÷ pre-money fully diluted shares new shares issued = investment ÷ price per share

Run those two lines in that order and the cap table can never disagree with the term sheet. Run them backwards, by deciding the investor's percentage first and reverse-engineering a share count, and the arithmetic will still close while quietly moving the pre-money valuation.

Keep the model in share counts. Percentages are output, and they change under you.

The option-pool shuffle

Anantara's seed term sheet reads: ₹24 crore pre-money, ₹6 crore investment, a 15% employee option pool measured on the post-money share count, and the pool is to be created before the round.

Post-money is ₹30 crore either way, so the investor's ₹6 crore buys 20.00% either way. The pool is 15% either way. What changes is who pays for the pool.

With the pool created pre-money, the pool shares are counted in the pre-money denominator. The founders' 13,000,000 shares must therefore represent 100 − 20 − 15 = 65.00% of the post-money count, which fixes the post-money fully diluted total at 20,000,000 shares, the pool at 3,000,000 and the investor's stake at 4,000,000. Price per share is ₹30 crore ÷ 20,000,000 = ₹15.00, and the pre-money denominator of 16,000,000 shares at ₹15.00 returns exactly ₹24 crore, which is the arithmetic closing on itself.

With the pool created post-money, the ₹24 crore pre-money is spread over the founders' 13,000,000 shares alone. Price per share becomes ₹24 crore ÷ 13,000,000 = ₹18.4615, the investor's ₹6 crore buys 3,250,000 shares, and the pool is then cut out of everyone's holding together: total shares rise to 19,117,647, of which the pool is 2,867,647. Founders finish at 68.00% and the investor at 17.00%.

Same company, same money, same pool size, and a 3.00 percentage point difference in who owns it. At the ₹30 crore post-money that is ₹90 lakh, and it moves from the founders to the investor, whose ₹6 crore is worth ₹6.00 crore under the first convention and ₹5.10 crore under the second.

Nobody in that room lied. The clause simply priced something the founder had not priced.

Who should pay for the option pool?

The economic logic is worth stating plainly, because founders who understand it negotiate better and investors who understand it stop pretending otherwise. Options are compensation for employees who have not been hired yet, to do work that will benefit every shareholder including the new one. Charging the entire cost to the pre-round holders is a negotiating position, not an accounting fact. The defensible middle, and the one experienced founders push for, is a pool sized to a written hiring plan for the next twelve to eighteen months rather than to a round number, because "15%" with no plan behind it is simply a price concession with a human-resources label on it.

One further consequence deserves a line of its own. The pool convention changes the price per share of the round, from ₹15.00 to ₹18.4615, so it also changes the reference price for every later anti-dilution calculation.

Round-on-round dilution

Ownership compounds downward, and it compounds by multiplication, not subtraction. Each round leaves an existing holder with a retention ratio equal to pre-money ÷ post-money, and the holder's ownership after several rounds is the starting figure times the product of the retention ratios.

Anantara raises a Series A eighteen months later: ₹120 crore pre-money, ₹30 crore in. The pre-money fully diluted count is the 20,000,000 shares the seed left behind, so price per share is ₹120 crore ÷ 20,000,000 = ₹60.00, exactly 4.00x the seed's ₹15.00. The round issues 5,000,000 shares and the post-round total is 25,000,000.

Every existing holder is diluted by exactly the same retention ratio, 120 ÷ 150 = 0.80, and 65.00 × 0.80 = 52.00. That uniformity is what makes dilution feel fair, and it is precisely what a liquidation preference and an anti-dilution clause break.

Uniform dilution is the well-behaved case, and it is the last one you will meet.

The founders' arithmetic is worth pausing on. Their stake fell from 65.00% to 52.00%, a loss of thirteen points, while the value of that stake rose from ₹19.50 crore to ₹78.00 crore. Dilution is not a loss unless the price fails to move, which is why liquidation preferences are where it hurts.