FAQS
What is a pro forma capitalization table?
- Financing
- Preferred Stock
A Pro Forma Capitalization Table ("Pro Forma" for short) is a dynamic model created in Microsoft Excel or another spreadsheet software that allows company management and investors to see a before ("pre-money") and after ("post-money") snapshot of how a potential investment will affect the ownership percentages of a Company.
The Pro Forma is also used to determine the new preferred stock share price, calculate the number of new shares that will need to be authorized before a financing can occur, and determine the number of shares that will be needed to be added to the Company's option pool if necessary.
In the example below, the fictitious company NewCo is valued at $10 million pre-money and is accepting a Series Seed investment of $2M for a post-money valuation of $12M. Prior to the investment, the founders' common stock makes up 80% of the Company’s capitalization, with the remaining 20% being reserved for stock options. After selling $2M of preferred stock to the investor and adding additional shares to the option pool, the founders will be diluted to 63.33% ownership. This example Pro Forma also calculates the price per share of the new preferred stock ($1.05556) and the number of shares the Company will need to add to the option pool (473,682) to maintain an available option pool of 20% of the post-money capitalization of the Company.
See FAQ "How do you calculate Series A price per share?" for more information on pro forma calculations.
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