At the time I was working hard to get our company to profitability, so I wasn’t seriously considering any unnecessary expense. I had inherited a cap table that was in Excel but may as well have been scribbled in a notebook. Changes to the cap table had been jotted down as notes with no thought to treat the cap table as a database or functional table. It had taken a lot of work to review everything and foot it back to emails and signed documents. As such I could see the value in software forcing correct discipline. But ultimately, I didn’t see it as a necessary expense as there are other ways to force discipline – so I didn’t incur the expense. I created a really nice Excel-based cap table tool, I tracked things in that tool from that point forward, and we sold that company to Deluxe with no issues using my Excel solution.

After the OrangeSoda M&A transaction I became the CFO of another venture-backed company called Goal Zero. I again put together a detailed cap table model in Excel and tracked our cap table that way through our sale of that company to a public company buyer. I was able to track and report our cap table for two consecutive private companies that sold to two public companies and I honestly had no need for cap table management software.

What has happened since then is that many cap table management companies began to pop up to compete against Solium. Those companies struggled to raise capital during the years 2010 through 2014. The company that had the most success couldn’t garner attention of top tier West Coast VCs and first had to go east to find anyone to believe it was an opportunity worth funding. It’s hard to blame VCs passing on them as most prior cap table management companies of any consequence had been gobbled up at lackluster multiples and relatively small prices by Solium (OptionEase, Corporate Focus, GlobalSharePlans). But then Capshare, OptionTrax, AST Private Company Solutions, eShares, Sharewave, Shoobx, Gust, and others began to pair cap table management (a nice to have) with 409A valuations – a service effectively required by statute. In coupling a must-have compliance requirement with their nice-to-have software they succeeded in using 409A as a beachhead to get the universe of VC-backed companies to use their nice-to-have software – which many, like me, had not used at high percentages previously.  

That combination 409A plus cap table management led to clear market traction with more of the addressable market using their software. This led to more attention and by extension more access to funding and brand name VCs. More funding led to more capital to spend on Marketing and Business Development. Additional funds toward Marketing and Business Development has led to more sales people and marketing content evangelizing the benefits of cap table management software. It also led to more development such that the software companies created more tools and benefits for investors, employees, and management. As such their software has become more than just a glorified Excel table in the cloud. I know that many are now using cap table management software. Heck, we are the valuation partner providing the 409As to the best of them (Shareworks, AST, and OptionTrax). But my question from my post title remains…who NEEDS it? Who NEEDS cap table management software?

Who I believe NEEDS it is any company that isn’t either outsourcing the financial function to a fractional CFO or have their own highly experienced CFO might benefit from having software that drives the discipline of correctly tracking your cap table.  Any company with a great outsourced CFO function like that offered by Kruze Consulting, Early Growth Financial, Constellation Advisors, Advanced CFO Solutions, and many others should have someone they are already paying for who can easily manage, report on, and track a company’s cap table in Excel. Or if you have a great CFO on staff then she or he should be able to, as I did, manage, report on, and track a company’s cap table in Excel. It’s really not hard and I find it somewhat silly to pay monthly fees to a software company to track what is really a fairly static table. It’s really easy. Heck, I could put together another Excel file like the ones I did for OrangeSoda and Goal Zero and just email it to you and it would have virtually all the functionality you get from these companies. But someone at your company does need to force the discipline of entering things correctly and documenting things correctly.

That said, any company that is granting a lot of option grants and between optionees and shareholders has a really complicated cap table, that company and CFO may benefit from having some elegant software helping them track it all. Additionally, any company that wants their cap table with someone who might manage their equity once they go public, they could go with an option like Shareworks or AST Private Company Solutions who could manage their cap table while private AND help them transition to public company equity management. Any company who thinks getting a 409A through a cap table management software company is the right call to save money on valuations I would hope is smart enough to realize that nobody gives away their software for free. The all-in cost of using cap table management plus 409A valuation work will be more. The software companies are not charities. The all-in cost will be higher versus if they just tracked their cap table in Excel and used someone like us for 409A. But if they want or believe they need both, then I’d strongly recommend they go with Shareworks or AST Private Company Solutions where they can grow with them if they someday become public companies. They also then get their valuation from a legitimate firm like ours that can answer any of their questions, solve challenging problems, and be there to back up their valuation under any future audit scrutiny.