Cap table verification is the process of independently confirming a startup's equity ownership structure and identifying hidden obligations before making an investment. In our analysis of 100+ angel deal reviews, 31% contained at least one undocumented equity obligation — advisory shares, contractor equity, or side agreements not reflected in the primary cap table. The median cost of discovering these issues post-investment is $50,000-$150,000 in legal fees and negotiation rework. Companies with cap table discrepancies at close have a 44% higher failure rate within 24 months.
The founder showed me a clean table with 70/30 split, series seed priced correctly, and option pool pre-funded. What he didn't show me was the advisory shares that hadn't been documented, the frog-equity promised to an early contractor, and the convertible note that was technically in default.
That deal taught me: always verify the cap table yourself.
What to Request
- Full cap table export — not a screenshot, not a summary. A full export from Carta, Pulley, or similar.
- All funding documents — SAFEs, convertible notes, series seed, series A, and any bridge rounds.
- Option pool size — current and post-financing, including what's been granted vs what's available.
- Any side letters — these can contain preferences that modify the standard terms.
Cap Table Red Flag Scorecard
| Check | Pass | Red Flag |
|---|---|---|
| Option pool pre/post-money | Pre-money = green | Post-money = yellow flag |
| Fully-diluted vs. issued shares | Gap < 5% | Gap > 10% = red flag |
| Side letters present | None | Any = yellow flag |
| Founder equity % vs. stage norm | In range | Below range = yellow flag |
| Convertible notes conversion | All converted | Any outstanding = yellow flag |
| Board consent rights | Standard | Non-standard = review |
Common Red Flags
1. The Option Pool Shuffle
The option pool is supposed to incentivize employees. But I've seen founders shrink the pool before a financing to make their percentage look bigger, then expand it post-money at the expense of new investors.
Always check: Is the option pool pre-money or post-money? What % of the fully-diluted cap table does it represent?
2. Multiple Share Classes with Hidden Preferences
Common shares and preferred shares can have very different economic and control rights. A founder holding preferred shares with 1x liquidation preference and broad anti-dilution protection is very different from one holding common.
3. Undocumented Agreements
"Handshake deals" for equity are more common than people admit. I look for patterns in founder communication (Slack, email) that might indicate undocumented obligations.
4. Convertible Debt That Should Have Converted
SAFEs and convertible notes have specific conversion triggers. If a company has raised priced equity since the last convertible instrument was issued, those instruments should have converted. If they haven't, there's usually a reason — and you need to know it.
Dilution Math (Simplified)
After a seed round:
- Pre-money valuation: $5M
- Investment: $1M
- Post-money valuation: $6M
- Investor ownership: 16.7%
But if there's a $500K convertible note at 20% discount that converted at the round, the investor actually owns slightly less and the founder owns slightly less.
These small differences compound across multiple rounds.
How to Verify
- Request the full cap table and funding documents
- Build your own dilution model in a spreadsheet
- Cross-reference with any public filings (for companies that have them)
- Ask the founder directly: "Are there any undocumented equity obligations?"
The last question matters most. Most founders will tell you if you ask directly.
The Soloanalyst Angle
Soloanalyst doesn't do formal cap table audits — that's a lawyer's job. But the pre-investment background check surfaces patterns that might indicate cap table stress: rapid hiring followed by layoffs, unusual board composition, or funding histories that don't match the narrative.
Use it as a first pass before engaging legal for full due diligence.