Cap Table · Conversion · Waterfall · Capital Structure
We build, audit, and manage the capital table that every financing, conversion, and exit decision depends on, so founders and boards know exactly what each outcome is worth before they commit to it.
A capital table (cap table) is not a record-keeping exercise. It is the single document that determines who controls a company, who is paid in what order, and what a founder actually walks away with. Most of the cap tables we inherit are spreadsheets that were accurate two rounds ago: before the SAFEs, the convertible notes, the option refreshes, the side letters, and the participating preferred.
Red Lion Advisory rebuilds that picture from the source documents up. We reconcile every instrument to its executed agreement, construct the pro forma cap table under each financing scenario, and model how convertible instruments behave at conversion, at a down round, and at exit.
The output is not a chart. It is a decision-grade model that answers the questions boards actually ask: what does this term sheet cost us in dilution, where does the preference stack break, and at what valuation does common equity begin to participate?
Capital structure work compounds. An error in the cap table becomes an error in the conversion analysis, which becomes an error in the waterfall, which becomes a founder discovering at closing that their outcome is materially different from what they expected. We work the chain end to end.
A pro forma cap table shows ownership as it will exist after a contemplated transaction closes, not as it stands today. We build it from executed documents rather than prior spreadsheets, capturing authorized versus issued shares, option pool sizing and refresh mechanics, warrant coverage, and every outstanding convertible instrument.
We then run the proposed round against it: pre-money versus post-money pool treatment, dilution by holder class, and the founder and employee ownership that survives the raise. When a term sheet is being negotiated, this is the model that tells you which terms are worth fighting for.
Ongoing cap table management keeps the record clean between events. We establish a single authoritative source, reconcile it against board consents, stock ledgers, option grant records, and 409A inputs, and maintain it through grants, exercises, transfers, repurchases, and secondary activity.
For companies with multiple entities, rollover equity, or profits interests, we structure the record so that it survives diligence. A clean capital table shortens transaction timelines and removes one of the most common sources of late-stage deal friction.
Conversion modeling resolves what convertible instruments actually become. SAFEs, convertible notes, and convertible preferred each carry their own valuation caps, discount rates, interest accrual, most-favored-nation provisions, and qualified financing thresholds, and they interact.
We model conversion under every triggering event: a priced round at various valuations, a change of control, a maturity date with no financing, and a down round with anti-dilution adjustment. We quantify how full-ratchet versus broad-based weighted average anti-dilution changes the outcome, and we show the resulting ownership on a fully diluted basis at each trigger.
Waterfall modeling distributes exit proceeds through the preference stack in contractual order. We model liquidation preferences by seniority, participation rights and caps, the convert-to-common decision at each preferred class, accrued dividends, management incentive plans, escrow and holdback treatment, and transaction expenses.
The result is a proceeds curve across the full range of exit values, showing what every holder class receives at each point, including the breakpoints where preferred holders are indifferent between taking their preference and converting to common. For multi-party transactions with rollover equity or earnouts, we extend the model to reflect the actual deal structure rather than a simplified approximation.
Modeling is the input; the decision is the point. We advise on how to structure the next raise so the capital stack remains financeable: balancing equity, structured instruments, and debt against control considerations, covenant burden, and the cost of capital across scenarios.
For companies with an accumulated overhang of preferences and structured terms, we model restructuring and recapitalization alternatives that restore incentive alignment for the team that has to execute the plan.
Every engagement produces working models you retain: auditable, documented, and structured so your team can maintain and extend them after we step out.
A fully diluted cap table rebuilt from executed source documents, with an audit trail linking every position to its underlying agreement.
Post-transaction ownership across multiple financing structures, valuations, and option pool treatments in a single comparable view.
Instrument-level conversion outcomes for every SAFE, note, and convertible preferred across each triggering event.
Proceeds distribution by holder class across a full range of exit values, with participation and convert-to-common breakpoints identified.
A plain-language assessment of what each proposed term costs in economics, control, and downstream flexibility.
Presentation-ready exhibits that communicate capital structure and outcome ranges to boards, investors, and lenders without further formatting.
We work from documents to decisions in a defined order, so that each stage is validated before the next one builds on it.
We collect charter documents, financing agreements, board consents, option plans, side letters, and the existing cap table, then reconcile them against one another.
We rebuild the capital table from the source record, resolving discrepancies and documenting every assumption that cannot be resolved from documents alone.
We layer pro forma, conversion, and waterfall logic onto the verified base, then stress the model across the outcome range that matters to the decision.
We present findings to founders, boards, and counsel, support negotiation with live scenario runs, and hand over documented models your team retains.
We are most useful where the capital structure has accumulated history: multiple rounds, mixed instruments, and terms negotiated under different conditions.
Preparing for a raise or an exit and needing to understand, in advance, what each structure means for their own economics and control.
Evaluating financing alternatives, approving option pool expansions, or assessing the fairness of a proposed transaction across holder classes.
Underwriting an investment into an existing structure and requiring an independent view of preference stack, dilution, and downside outcomes.
Assessing direct private investments where the return profile depends heavily on structural terms rather than headline valuation.
The questions founders, boards, and investors most often bring to us before a financing or exit decision.
A pro forma cap table shows ownership as it will exist after a contemplated transaction closes, rather than as it stands today. It incorporates the new shares being issued, the conversion of any outstanding SAFEs or convertible notes, changes to the option pool, and the resulting dilution to each existing holder class. It is the model used to evaluate what a term sheet actually costs before it is signed.
A cap table records current ownership. Conversion modeling determines what convertible instruments become under specific triggering events. SAFEs and convertible notes carry valuation caps, discount rates, accrued interest, and most-favored-nation provisions that interact with one another, and their conversion outcome changes depending on whether the trigger is a priced round, a change of control, a maturity date, or a down round. Conversion modeling resolves those mechanics instrument by instrument.
A cap table shows ownership percentages. A waterfall model shows cash. Because liquidation preferences, participation rights, and seniority determine the order in which exit proceeds are distributed, ownership percentage and payout percentage are often very different numbers. Waterfall modeling maps proceeds to each holder class across a range of exit values and identifies the breakpoints where preferred holders convert to common.
We start with source documents rather than the existing spreadsheet. We reconcile the charter, financing agreements, board consents, option plan and grant records, and any side letters against one another, then rebuild the capital table from that record. Discrepancies are documented rather than silently corrected, so you can see exactly where the prior version diverged and why.
Yes. Cap table work sits at the intersection of legal documentation, accounting treatment, and financial modeling. We coordinate with corporate counsel on document interpretation and with your accounting and valuation providers on 409A and equity compensation inputs. We do not provide legal or tax advice; we build the financial models those advisors and your board rely on.
Timeline depends on the number of financing rounds, the volume of convertible instruments, and the quality of the underlying document record. A focused engagement on a company with a straightforward history can be delivered in a matter of weeks; a multi-entity structure with a decade of accumulated instruments and incomplete records takes longer. We scope the work after an initial document review so the timeline reflects actual conditions rather than an estimate.
Whether you are negotiating a term sheet, preparing for an exit, or simply need a capital table you can trust, we can rebuild the picture and model the outcomes before the decision is made.