A pro forma cap table is a projection of the capitalization table as it will look right after a financing closes: existing shares and options, every convertible instrument turned into shares at its agreed terms, any increase to the option pool, and the new investor’s shares. Investors ask for one before signing because it fixes the price per share and shows that the numbers in the term sheet add up. For founders, it is the clearest picture of what a round really costs.
What does a worked pro forma look like?
The fastest way to understand a pro forma is to build one. Here is a simple company before a Series A:
- 8,000,000 founder shares.
- 600,000 options granted to employees and 400,000 options still unallocated in the pool.
- Two post-money SAFEs: $1,000,000 at a $10 million post-money cap, and $500,000 at an $8 million post-money cap. No discounts.
The term sheet offers $4 million at a $16 million pre-money valuation, with the unallocated pool topped up to 10% of the post-money company, and the top-up counted in the pre-money. That is a common structure, sometimes called the option pool shuffle.
| Holder | Shares before | % before | Shares after | % after |
|---|---|---|---|---|
| Founders | 8,000,000 | 88.9% | 8,000,000 | 54.1% |
| Options granted | 600,000 | 6.7% | 600,000 | 4.1% |
| Unallocated pool | 400,000 | 4.4% | 1,478,038 | 10.0% |
| SAFE 1 ($1M at $10M cap) | Not yet shares | 1,074,627 | 7.3% | |
| SAFE 2 ($0.5M at $8M cap) | Not yet shares | 671,642 | 4.5% | |
| Series A investor | 2,956,077 | 20.0% | ||
| Total, fully diluted | 9,000,000 | 100% | 14,780,384 | 100% |
The Series A price works out at about $1.353 per share. SAFE 1 converts at about $0.931 and SAFE 2 at about $0.744, both below the round price, so the caps apply. The post-money valuation is $20 million: $16 million pre-money plus $4 million of new money.
Ownership after the round in the worked example
Fully diluted, percent of 14,780,384 shares
How did those numbers come out?
The pro forma is built in a fixed order. Change the order or a definition and the answer changes.
Step one: convert the SAFEs. A post-money SAFE fixes the holder’s percentage at its cap: $1,000,000 divided by $10,000,000 is 10%, and $500,000 divided by $8,000,000 is 6.25%. Those percentages apply to the company’s capitalization just before the new money, which here is the 9,000,000 existing shares and options plus the SAFE shares themselves. That gives 1,074,627 and 671,642 shares. Under the standard post-money SAFE, an option pool increase made in connection with the priced round is generally left out of this calculation, which is why the SAFEs are not diluted by the top-up.
Step two: size the pool and the new shares together. The investor wants 20% of the post-money company ($4 million of $20 million) and an unallocated pool of 10% after closing. Everything else, the founders, granted options and converted SAFEs, must then make up the remaining 70%. Those holders have 10,346,269 shares, so the post-money company has 14,780,384 shares, the investor gets 2,956,077 and the pool grows to 1,478,038.
Step three: derive the price. $4,000,000 divided by 2,956,077 shares is about $1.353. Multiply by the pre-money shares and you get back to the $16 million pre-money valuation.
What do investors check in your pro forma?
A lead investor and its counsel will rebuild the pro forma themselves. What they want from yours is a clean starting point that matches the documents. These are the checks they usually run.
| Check | What they compare | Common problem |
|---|---|---|
| Share counts | Cap table against stock certificates or the transfer ledger | Founder shares issued but not recorded, or recorded but never issued |
| Options | Grant ledger against board approvals and the plan limit | Grants above the plan’s authorized shares, or not board approved |
| SAFEs and notes | Each row against the signed instrument | Cap or discount in the sheet differs from the PDF |
| Note interest | Accrued interest to the conversion date | Interest ignored, so the noteholder gets fewer shares than due |
| MFN clauses | Earlier SAFEs against later, better terms | An MFN holder entitled to a lower cap nobody applied |
| Promised equity | Offer letters and advisor agreements | Equity promised by email but never granted |
| Authorized shares | Total after the round against the charter | Not enough authorized shares, so the charter needs amending |
The last row is easy to miss. If the round needs more shares than the certificate of incorporation authorizes, the charter has to be amended as part of the closing, which needs board and stockholder approval.
How does a convertible note change the math?
Convertible notes add accrued interest. A $250,000 note at 6% simple interest, outstanding for 18 months, converts with $22,500 of interest on top of the principal, so $272,500 converts. Most notes then convert at the lower of the cap price and the discounted round price.
Notes also usually define the cap as a pre-money figure, unlike the post-money SAFE, which changes how the conversion is calculated. If you have both, keep them in separate sections of the pro forma with the formula written out for each. The convertible note calculator handles the interest and the conversion price.
How do you test different term sheets?
Founders often have more than one term sheet, or one with terms still open. A pro forma lets you compare them on what matters: your ownership after closing and the price per share.
Compare founder ownership across term sheets
Your ownership after
52.5%
- Post-money valuation
- $15,000,000
- New investor stake
- 20%
- Percentage points given up
- 17.5%
Indicative result from the numbers you enter. Not financial, tax or legal advice.
The dilution tool gives a quick read for each offer. For the pool, the option pool sizing calculator works out a pool from a hiring plan rather than a round number, which is the argument that usually moves an investor from 15% to 10% or 12%.
A few comparisons worth running before you sign:
- The same pre-money with a 10% pool and with a 15% pool.
- A higher pre-money with a larger pool against a lower pre-money with a smaller one.
- The effect of one more SAFE signed before closing.
- What happens if a note’s maturity date passes before the round closes and its terms change.
What format do investors expect?
There is no single required format, but some conventions save time:
- One summary tab with the before and after columns shown above.
- One tab per instrument class: common, options, each SAFE, each note, the new preferred.
- Formulas visible, not pasted values, so counsel can check the logic.
- A source column linking each row to the signed document in the data room.
- A version date in the file name, updated every time a SAFE is signed or a term changes.
Many companies keep the live cap table in equity management software and export the pro forma to a spreadsheet for the round. Either is fine as long as the export ties to the system of record.
What changes between the term sheet and closing?
A pro forma is a living document until the round closes. Several things commonly move it after the term sheet is signed:
- A late SAFE. If the company signs another SAFE before closing, every number shifts. Most term sheets limit this, but it still happens with small checks from angels.
- New option grants. Grants made from the existing pool before closing reduce the unallocated pool, which can increase the top-up the investor asks for.
- Note interest. Each extra week before closing adds a little interest to every convertible note.
- A second investor. If the lead allocates part of the round to a co-investor, the new investor line splits, though the totals stay the same.
- Final legal review. Counsel may read a SAFE or note definition differently from your model.
Keep a change log at the bottom of the summary tab: what changed, when and why. When the final closing version is attached to the stock purchase agreement, everyone can see how it moved from the first draft.
Where should the pro forma sit in the data room?
Put it in the cap table and financing folder, next to the current cap table, the SAFE and note ledger and the signed instruments. Give the lead and its counsel access; co-investors often see a summary only. Set the working file to view only for everyone outside the lead so there is one version in circulation.
The Series A round page shows the full folder plan for a priced round, and the startup data room checklist lists the pro forma as a seed-stage item, which is earlier than many founders expect.
How do you build a pro forma from scratch?
Build a pro forma cap table for investors
- 1Start from signed documents
Collect stock purchase agreements, the option plan and grant notices, every SAFE and note, and any side letters or promised grants.
- 2Rebuild the current table
List every holder and instrument with the number of shares or the terms, and check the totals against the charter's authorized shares.
- 3Convert each instrument
Apply each SAFE's cap or discount and each note's interest and conversion terms, using the definitions in the signed documents.
- 4Model the pool and new money
Size the option pool from the term sheet and solve for the new investor's shares and the price per share.
- 5Reconcile to the term sheet
Check that the pre-money, post-money, investor percentage and pool size match what the term sheet says.
- 6Share one version
Upload the pro forma with a version date to the cap table folder, view only, and update it every time a term changes.
Send it to your lawyer before the lead’s counsel sees it. Disagreements about conversion definitions are much easier to settle between your own advisers than across the table.
