This post is self serving to some degree as USV is an investor in eShares. But in the world of VC and startups there isn’t much that is more broken than cap table management. eShares fixes that by putting the entire cap table online and allowing your company to issue new shares and options directly from the platform. It’s kind of like writing checks directly from your accounting system. Everything gets recorded and there are no missing stock certs or broken promises.
I explained this to one of our portfolio companies last fall around the time we made our investment in eShares. One of the co-founders replied via email “we don’t need that, our cap table is all in a single spreadsheet.” A month or two later, as we were doing a round of financing, when the lawyers were doing their diligence, it came out that our cap table spreadsheet was missing some shares that had been issued but not recorded. I had a good laugh at that because it is always the case that something is not recorded. A perfect cap table is very rare, unless you are using a tool like eShares.
The VCs and angel investors aren’t hurt so much by this because our investments are large and mistakes made on our shares are easily caught. Employees are the ones who have the most to gain from eShares because they are the ones whose issuances are most often missed or not properly recorded on a cap table and these mistakes can go on for a long time before being caught. This causes issues in terms of exercise price changes and tax issues for the employee.
If you are starting a company, do yourself a favor and start building your cap table day one on eShares. If you have been managing your cap table in a spreadsheet for years and are tired of doing it that way, talk to eShares. They will help you “port” your cap table to their system. That’s part of the onboarding service they provide. And then you can start issuing shares the way you’d imagine it would be done in 2015. The way most companies is doing it is circa 1900. I’m serious about that.
If you want to learn more about eShares, contact them here.