From 100% to what, exactly? Cap table software that follows your ownership round by round

Two founders incorporate and take 4,000,000 shares each: 8,000,000 shares, 50% apiece. The split is the easy part. Investors expect founder shares to vest, so that a co-founder who leaves early does not keep a full half. In Steven Kaplan and Per Strömberg's study of 200 venture investments made from 1987 to 1999, "Founder vesting is used in almost 42% of financing rounds", and in almost 55% of pre-revenue ones (Kaplan & Strömberg, 2000). The shape has hardened since: an optional protective provision in the NVCA's model charter needs the preferred holders, or their directors, to approve any grant to a 1% holder that vests "other than on a four-year schedule with a one-year cliff" (NVCA, 2025).

Under that schedule a founder who leaves in month 11 has vested nothing, and one who leaves in month 13 has vested 27.1%; the rest returns to the company. A founder who takes restricted stock can elect under section 83(b) to be taxed when the shares are issued, and the election "shall be made not later than 30 days after the date of such transfer" (26 U.S.C. §83). A spreadsheet records the 50/50 split and forgets the clock: the cliff dates, the unvested shares and the 30-day deadline end up in someone's inbox.

The company sets aside options for its first engineers and grants 1,000,000 of them. Nothing has been sold, yet the founders now hold 88.9% of the company fully diluted, the count that treats every option as exercised and on which investors price a round. Employee options in the NVCA's model term sheet vest "[25% after one year, with remaining vesting monthly over next 36 months]" (NVCA, 2020).

Each grant also starts a clock. An option priced from an independent appraisal made no more than 12 months before the grant is presumed to be at fair market value under the 409A regulations (26 CFR 1.409A-1), and a failure can cost the employee an additional tax of 20% of the compensation (26 U.S.C. §409A). When an employee exercises an incentive stock option, the company must file Form 3921 for each transfer that year (IRS, 2025). Once securities sold under Rule 701 exceed $10 million in any 12 consecutive months, the company owes holders disclosure, including financial statements no more than 180 days old, before the sale (17 CFR 230.701). None of these dates lives in a spreadsheet of percentages. Our 409A explainer covers how the appraisal is made.

To fund its first year the company raises $2.0M on post-money SAFEs with a $16M valuation cap. The SAFE is the default instrument at this stage: on Carta, SAFEs made up 90% of pre-seed rounds in the first quarter of 2025 (Carta, 2025). Y Combinator, which publishes the standard form, puts its main advantage plainly: "the amount of ownership sold is immediately transparent and calculable for both the founder and the investor" (Y Combinator). Divide the money by the cap, and the SAFE holders own 12.5%.

The certainty belongs to the investor. Under the post-money form "the safes are not diluted by each other", so each new SAFE comes out of the founders and option holders alone, and YC's own comparison page counts it out: "Five $100k SAFEs at a $5M cap is 10% sold, not 2%." (Y Combinator). On a pro forma basis the founders now hold 77.8%. The user guide adds a dry warning for anyone tempted to keep going: "Raising more than the Post-Money Valuation Cap would result in negative ownership for founders!" SAFE vs convertible note compares the two instruments.

The company raises a Series A of $8.0M at a $32M pre-money valuation. As the NVCA's model term sheet provides, that pre-money "shall include an [unallocated and uncommitted] employee option pool", sized as a share of the post-money capitalization (NVCA, 2020); here, 10%.

The headline is 20%: $8.0M buys a fifth of a $40M company. The founders' stake falls from 88.9% to 54.4%, a loss of 38.75%. The other 18.75 points never appear in the headline: 8.75 for the SAFEs, which convert at $1.5556 a share against the investor's $2.7222, and 10.0 for the pool. Measured in price, the pool turns the $32M pre-money into an effective $28.0M for the existing holders, 12.5% less than the term sheet states. A rival offer at a $30M pre-money with a 5% pool would have left the founders 57.5%: the lower price was the better offer (our arithmetic). Option pools and employee equity explains why investors ask for the pool up front.

The board deck now plans a Series B and a Series C. Carta put median dilution across rounds from seed to Series C at about 16% in 2025, down from 19% two years earlier (Carta, 2026). Two rounds at that median take the founders from 54.4% to 45.7%, then to 38.4% (our arithmetic). Carta's founder data put the median founding team at about 36% after the Series A (Carta, 2026); the medians come from different companies, so they set a range for the plan, not a forecast.

Investors protect their percentage by paying for it. The model term sheet lets major investors "participate in subsequent issuances of equity securities" in proportion to their fully diluted ownership (NVCA, 2020). A Series A investor with 20% that buys 20% of each later round stays at 20%; one that does not falls to 16.8% after the first and 14.1% after the second. The right is written for investors, so the founders' line falls with every round they cannot buy into. How equity dilution compounds works through the same sequence.

Eighteen months after the Series A the plan meets the market. The company raises $10.0M on a $26.45M pre-money valuation: $1.80 for each share it had after the Series A, 34% below the Series A price. Down rounds were 12.1% of the 166 financings Cooley handled in the second quarter of 2026 (Cooley, 2026), and Carta put its down-round rate at 11.4% in the first quarter (Carta, 2026).

Whatever the charter says, the founders' stake loses about a third of its value at the new price. The anti-dilution clause decides who absorbs the rest. Under the NVCA's broad-based weighted average, the Series A conversion price resets from $2.7222 to $2.4494 and the founders hand the Series A another $0.31M of value. Under a full ratchet, which resets it to the new $1.80, they hand over $1.34M, more than four times as much. Of the 175 rounds Kaplan and Strömberg could classify, 75.4% used a weighted average and 19.4% a full ratchet. The sample is old, but the clause is still in the 2025 model charter, which also lets the preferred holders waive an adjustment in writing (NVCA, 2025). Surviving a down round covers the negotiation.

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Years later the company is sold. Each preferred holder takes the greater of its money back and what its shares would fetch as common, the non-participating preference in the NVCA's model term sheet; in Cooley's second-quarter 2026 deals, 95.8% carried a 1x preference and 96.4% were non-participating (Cooley, 2026). Here the preferences add up to $20.0M: $10.0M for the down-round investor, $8.0M for the Series A and $2.0M for the SAFE holders, whose shares carry a preference set at the SAFE price.

The founders own 38.6% at every sale price; what they receive depends on the price. At $18M the preferences take everything and the founders receive nothing. At $30M the preferred take their $20.0M first and the founders receive $7.64M, 25.5% of the proceeds. Only from about $51M does every preferred holder convert, and at $100M the founders receive $38.65M, their full 38.6%. How to read a term sheet explains the clauses behind each line.