A guide to cap tables, according to Temidayo Oniosun

Angel investing is hard and inherently risky. Unlike venture capital firms, angels do not often have the resources to perform deep due diligence and sometimes invest intuitively, but one leveller is the startup’s cap table.

A cap table is the single source of truth for who owns shares in a startup, under what terms, and how proceeds will be distributed in future financings or exits. It’s often the final due diligence step that an investor takes before wiring money. 

As an angel, you often do not own enough equity to dictate the structure, but you should read the cap tables before wiring money, revisit it with every proposed round, and model what it looks like after your cheque converts to protect your investment. 

While most angels do not have board seats, they can negotiate for information rights, pro-rata follow-on rights, or, in some extreme cases, even vetoes on key decisions. These terms give you visibility and leverage, two things that can make all the difference in a future negotiation or liquidity event. 

For this week’s Ask an Investor, I spoke to Temidayo Oniosun, the CEO of Space in Africa and an angel investor in forty startups, about how angel investors should think about cap tables. His investment portfolio includes active startups like MoneyHash, WeMove, Touch and Pay, and Eden Life, and shuttered startups like Dash and Zazuu. 

Like most Nigerian angel investors, the successes of Paystack and Flutterwave drew him to investing in African startups. “Startup investing became a hot topic. I had some excess capital, so I thought, ‘Why not?’ he said. 

Since he started investing in 2021, he has mostly used two approaches. “First, there are startups I come across directly. Either I reach out to the founder after seeing what they’re building, or they pitch me. If we have a good conversation and I believe in what they’re doing, I write a cheque,” he said. 

That approach brought startups like WeMove and Zedvance Africa to his portfolio. The other approach is through an angel syndicate, a group of angel investors that pool capital into startups. Through this syndicate, he has invested in over 20 startups. 

His experience as a founder and investor has allowed him to develop some strong opinions on cap tables. Our conversation serves as a guide to angel investors and founders on how to structure cap tables at the earliest stages of the startup process. 

This interview has been edited for length and clarity.

How do you define a healthy cap table at the seed stage? What should it typically look like?

What constitutes a healthy cap table has changed over the past five years, given the different waves we’ve seen in startup fundraising. To be honest, I haven’t written any new cheques yet this year so I can’t say for sure if the dynamics have changed again. But generally, at the seed stage, I expect to see some level of structure in place. It’s different from the pre-seed stage where there’s often little to no structure.

At seed, the company should have matured a bit. I expect the founders to still own a significant majority of the business. It’s too early to be giving away large chunks of equity. There should also be signs that the founders are still fully committed to what they’re building.

What exactly do you mean by structure and, percentage-wise, what qualifies as a founder still owning a good share of the company?

When I talk about structure, I mean things like having a clear employee stock option plan, if the company intends to have one, and making sure that whoever is on the cap table actually has a direct role in or connection to the business.

Let me give you an example. I’ve seen cases where a co-founder is no longer involved in the company but still holds a significant chunk of equity. That’s not healthy; or situations where a lot of equity has already been sold in secondary deals even though the company is still early-stage.

So ideally, at seed, I want to see the core founding team still holding about 65% of the company after the round is closed. If it’s a solo founder, I’d expect them to still hold a majority stake. If it’s multiple founders, that 65% is split among them, but it signals they’re heavily invested in the long-term success of the company.

What’s the first thing you look for on cap tables? And what immediately raises a red flag for you?

One of the first things I look for is who’s actually on cap tables and what roles they play. A major red flag is seeing names of people who have no direct involvement in the business—no operational or strategic contribution.

It’s different if it’s a respected institutional investor or a well-known angel. But if I’m seeing random individuals, people who aren’t adding value, holding significant amounts of equity, that’s a problem.

Another red flag is when an angel investor holds a disproportionately large stake. If an angel owns, say, 15–20% of the company at the seed stage, that’s worrying. That kind of concentration too early suggests the founders may have given away too much equity prematurely, which could complicate future rounds.

Have you ever passed on a deal because the founders had already given away too much equity?

Not directly because of that. At least not as the sole reason. I’ve never looked at cap tables and said, “I’m out” purely because the founders gave up too much equity. But it can definitely be a contributing factor.

Usually, by the time I get to evaluating cap tables, I’ve already formed an opinion based on other criteria—market opportunity, team strength, product quality. The cap table is more of a final due diligence check, so while I haven’t passed on a deal solely because of an over-diluted cap table, it could definitely help tip the decision toward a no if other concerns already exist.

What’s a common mistake founders make when setting up or managing their cap tables early on? 

One big mistake founders make is giving away too much equity too early, especially at the pre-seed stage. This usually happens when founders are desperate; maybe they need just enough capital to get the company off the ground or build an MVP (minimum viable product) so they take on bad deals.

I once saw a pre-seed round where the investor was given undilutable equity. That’s a terrible idea. It essentially locks in a fixed percentage for that investor no matter how much money the startup raises in the future. It complicates things for later-stage investors and can be a dealbreaker.

These kinds of decisions, made out of desperation, almost always backfire. By the time you’re raising a seed or Series A, you realise you’ve boxed yourself in and no quality investor wants to walk into that kind of mess.

My advice to founders is: if you’re in a position where the only way forward is to take a really bad deal, maybe it’s better to pause. Let the idea breathe. Go back to the drawing board rather than signing away your company to stay afloat.

Something that happens often at the early stage, especially with first-time founders, is that they give equity to friends, supporters, or developers. Basically anyone who helps them in the early days. What advice would you give to founders about issuing equity to these kinds of people?

That’s a really good question and a situation I still see quite a bit, surprisingly. Let me answer this in two parts. First, from a general startup-building perspective, and second, from the point of view of an investor.

I understand why founders do this. Early on, you’re broke. Maybe you’re squatting with someone. Maybe a friend is helping you build your MVP for free. You feel like you owe them, and the only currency you have is equity. So you start dishing it out to everyone who lifts a finger. That’s the instinct. But here’s the thing: most of the time, that instinct is wrong.

I recommend founders take a more structured approach. If someone truly believes in your vision and wants to contribute meaningfully, there are ways to involve them that don’t jeopardise your cap table. For example, you can create clear, limited agreements, maybe a vesting plan or milestone-based rewards. Importantly, these can be off-cap-table. You don’t need to reflect everything on your official cap table, especially at the very early stages.

Because here’s what happens: you give your developer friend 5% equity early on. Then you go out to raise from a VC, and that investor looks at your cap table and says, “Wait—you gave this person 5%, and now you’re asking me for $500,000 for the same 5%?” It creates serious credibility and valuation issues.

So ideally, don’t do it. If you really have to, structure it well and keep it off the main cap table until there’s a more formal round. And most importantly, only give equity to people who are genuinely moving the needle for your company, not just because they were around in the beginning.

How do you think angels and syndicates should be reflected on cap tables? Should they be listed individually or via a special purpose vehicle (SPV)? What’s the best practice?

I think SPVs are a great way to keep cap tables clean, especially when you’re dealing with multiple angels. But I also understand why some founders choose to list individuals instead.

There are cases where having a well-known angel visibly on your cap table is a huge credibility boost. For example, there’s a company I invested in that had GB from Flutterwave (CEO, Oluwagbenga Agboola) on their cap table. Now, he only had a tiny stake, but the founders made sure people knew about it. Why? Because when other investors saw GB was backing them, it gave them immediate legitimacy. It worked as a signal.

So I’d say if your angels include big names who can act as a signal to the market, it can be strategic to list them individually. But if it’s a bunch of friends, family, or unknowns and you’ve raised from a lot of them, then absolutely use an SPV. That way, you keep your cap table tidy and avoid future fundraising complications.

Ultimately, it depends on who your angels are and what strategy helps your company raise the next round.

Since you’re an angel investor, how much equity do you typically aim for at the seed or pre-seed stage? 

It depends on how I’m investing whether directly or through a syndicate. If I’m investing through a syndicate, I don’t mind holding as little as 1%, and sometimes that might go up to 5%, depending on the size of the round and how the syndicate is structured.

But if I’m investing directly, as in, I’m writing the cheque myself and possibly also contributing my time or network, I typically aim for between 10% and 20% equity. That’s because it’s not just about putting in money; I’m also investing effort. I want to help the startup scale. I want to be involved. So the equity I ask for reflects the fact that I’m bringing more than capital. I’m also bringing experience, support, and introductions. That level of ownership makes the risk worthwhile for me at such an early stage.

Earlier in the call, you said one red flag for you is when startups give away too much equity early on. But now you’ve said you typically aim for 10–20% equity at pre-seed when investing directly. How do you reconcile those two positions?

I understand why it sounds like a contradiction, but it’s not. Let me explain it with a practical example. Suppose I’m the only investor coming in at the pre-seed stage and I ask for 10% of the company. If the founder gives me that 10% and gives, say, another 10% or so to other early angels; then all told, they’ve only diluted 20% of the business. That means they still own 80%. To me, that’s totally fine and not a red flag.

It becomes a red flag when the founder has given away 30% or more at pre-seed without a clear justification (like significant traction, a top-tier investor, or strategic value). Or when the founder themselves no longer own a meaningful stake—say, less than 50%—and it’s still just the beginning.

So, to reconcile both positions, if I take 10–20% and the rest of the cap table is clean, with no excessive dilution, and the founder still owns a large majority, then it’s still a healthy cap table.

The issue isn’t my ask—it’s whether too many other people have already been given outsized chunks early on, leaving the founder under-incentivised or limiting flexibility in future rounds. Bottom line: I’m mindful of total dilution, not just my own share.

Do you think convertible notes and SAFEs simplify early-stage fundraising or do they just create confusion?

I absolutely think they simplify things. Convertible notes and SAFEs are great tools, especially for founders.

One of the biggest pain points for founders when raising money is the negotiation around valuation. It’s always a tug of war; investors think your valuation is too high, and you’re trying to prove it isn’t. It becomes this time-consuming debate that distracts from building the business. What tools like SAFEs and convertible notes do is eliminate that pressure, at least in the early stages. They allow you to raise capital without having to pin down a precise valuation. That’s huge.

And honestly, many founders don’t even know how to price themselves accurately until they start fundraising and hear feedback from the market. So these instruments buy them time, they let them raise money, start building, and then revisit valuation later when there’s traction and a clearer sense of the company’s worth.

So yes, I’m a fan. I think SAFEs and convertible notes have done a lot to streamline early-stage investing for both founders and investors.

Have you seen any cap table restructuring as an angel investor? And how did you approach it?

Not really in the strictest sense of restructuring. What I’ve seen more commonly is when a company consolidates its cap table by moving angels under one SPV (Special Purpose Vehicle). This usually happens during a follow-on round when the founders or new investors want to clean up the cap table and make it more organised.

So, instead of having 20 angels scattered across the cap table with small allocations, they group everyone into one entity. It simplifies things for legal, easier for decision-making, and easier when new institutional investors come in.

But no, I haven’t really come across a scenario where a startup did a full-blown restructuring like clawing back shares or renegotiating early deals. Most of what I’ve seen has just been cleanup efforts using SPVs.

As an investor, what are the things you should absolutely do when giving money to a startup at the early stage? What can you do to safeguard your investment?

To safeguard your investment at the early stage, the most critical thing is to do your homework. You need to deeply understand what the startup is building. Ask yourself:

Does the idea make sense?

Is there a real market for this product or service?

What needs to happen for this startup to reach product-market fit?

Can it scale?

That’s where most of the investor’s work comes in – not on cap tables, but on assessing the market, product, and founder.

Another important point: there are too many startups building things that either don’t scale or don’t have a large enough market. One of my current filters is simple. I want to see a clear path to at least $1 million in ARR (annual recurring revenue) within two years. If I can’t see that, then it’s probably not worth my time or capital.

Because let’s be real, some problems just aren’t worth solving at scale, or the business model can’t support strong enough revenue, or the founders are building in a way that won’t support a real exit. These are the red flags I focus on.

And lastly, once I do invest, I look for ways to add value. That could mean helping a startup put in operational structure or making introductions to potential customers. If I can help them make revenue faster, I’ll do it. That’s another way I protect my investment – by staying useful.

How can founders protect their cap tables? 

Some founders are indeed trying to protect their cap tables, but often they’re doing it in ways that don’t make sense. I’ve seen founders use ridiculously high valuations just to avoid giving up too much equity. And sometimes, it’s just laughable. Maybe that’s their strategy but honestly, I don’t think it’s working.

There are essentially two ways to protect your cap table. Raise less money. This is the smart way. Keep your cap table clean by limiting how much capital you take in early on.

Raise at a high valuation. This reduces the amount of equity you give away, but it can backfire. It often leads to a down round later or, worse, a total shutdown because no one wants to invest at an inflated valuation. You’re basically shooting yourself in the foot.

Founders are aware that protecting their equity matters, but the tactics they use like inflating valuations can end up hurting them.

Personally, I own 100% of my own company. I haven’t given out any equity yet. Even with the new startups we’re spinning out of my lab, I haven’t raised money. I’m funding them myself. That’s me putting my money where my mouth is. If protecting your cap table really matters to you, that’s the cleanest way: build with your own money or raise only what you truly need.

If a founder came to you with a messy cap table but a strong product and a strong team, what’s your first move?

If you’re telling me the cap table is messy, but the product and team are solid, the first thing I’d do is figure out how messy it actually is. Because “messy” can mean different things.

Now, to be honest, I typically wouldn’t invest in a company with a great product and great team if the cap table is a complete mess. It’s just too risky. But again, it really depends on the specifics.

If it’s something that can be cleaned up, say, through a restructuring or an SPV that consolidates investors to make the table look less chaotic, then maybe I’d proceed. But I wouldn’t commit capital without that being addressed. My investment needs to be protected.

The first step is to diagnose the situation. If we can clean it up and put proper structure in place, I might consider it. If not, I’d likely walk away.