As a financial management and consulting firm that works extensively with startups, one common issue we encounter is… who actually owns the company?

This question may seem straightforward. After all, shouldn’t the company be owned by the people who founded it?

In many cases, that is indeed the answer. Most businesses are founded by a single entrepreneur or a group of partners, sometimes within a family. Unless there are specific reasons (like selling the company), ownership typically remains with the individuals who founded it or family members who become involved in operations or inherit the business.

However, in the world of startups and technology companies, the situation is somewhat more complex. Here, too, the company is usually founded by a core group of entrepreneurs. But developing a technological product and marketing it is a lengthy process, sometimes taking years, and requires substantial funds for salaries, servers, development tools, and more. Therefore, to progress, most startups need to raise investment. This involves finding entities willing to invest capital in exchange for ownership stakes—private investors (angels), venture capital funds, larger corporations, and so on.

So how do you determine who owns the company?

In the early days of a company, ownership is fairly straightforward. Each founder typically receives an equal share of ownership. Sometimes one founder contributes more or less compared to others, and through mutual agreement among partners, the level of investment can be reflected in the amount of shares that founder receives. Founders may also decide early on to allocate some ownership to employees in the form of stock options.

But what happens when investors come into the picture? And what if certain investments carry more significance than others? For example, seed investments or early-stage funding rounds often involve smaller amounts compared to later rounds, but their importance is critical—without initial investors who believe in the idea and the team, the company may not be able to create its first version of the product.

So how do you calculate ownership considering the company’s position along its lifecycle, and how do you evaluate it against ownership resulting from larger investments that come later?

This is where a tool called Cap Table comes into play, which we maintain for our clients at Danoy. A Cap Table organizes all aspects of ownership in the company. Since each company is a unique financial story, every Cap Table can look different. Nevertheless, several parameters typically appear in it:

• Shareholder Identity: This includes all individuals and entities holding some ownership in the company—founders, employees, family members, and various investors.
• Type of Ownership: Regular shares held by founders, options for employees, preferred shares held by some investors, etc.
• Number of Shares: The quantity of shares each party holds.
• Ownership Percentage: Corresponding to the number of shares, sometimes adjusted by the type of shares.

As a company progresses, raises funds, and adds new investors, Cap Tables become more complex. The type of shares and their costs vary from round to round, and the dilution of shares needs to be considered throughout the journey. Since ownership in a business is crucial, there’s no room for errors, and every change in ownership and its impact on the percentage held by other owners must be accurately documented.

At Danoy, we serve as the financial department for many startups and specialize in maintaining Cap Tables. If you also need financial experts to guide you through fundraising processes and ownership calculations, feel free to reach out to us.