Every startup begins with a dream: often a big idea, a few co-founders, and the passion to build something valuable. But as your startup grows, so does the need to organize what lies behind the product: your structure, your agreements, and your cap table.
For many Nigerian startups, the cap table is often neglected or misunderstood. But to investors, it’s one of the first places they look. So, if you’re raising money, preparing to join an accelerator, or just want your company to be legally and structurally sound, this is for you.
What Exactly Is a Cap Table?
A cap table (capitalization table) is a detailed record of who owns what in your company. It shows:
- The founders and how much equity each one owns
- Any investors and their shareholding
- Option pools for employees
- SAFE/convertible note holders
- Any other equity promises or obligations
It evolves with each round of funding, equity grant, or ownership change. But here’s the catch- if it is messy, unclear, or over-promised, it can kill a deal before it even begins.
Common Cap Table Mistakes Nigerian Startups Make
1. Equal splits between founders by default
Founding with your best friend or sibling? Many teams split equity equally to “be fair.” But what happens when one founder gets a job and drops off? You’re stuck with a disengaged co-founder holding 50% of your company.
2. No vesting schedules
Vesting protects the company. If a founder leaves after 6 months, they shouldn’t walk away with full equity. Investors want to see structured vesting over time. This shows your commitment, thus giving them confidence, as well as preventing the kind of situation we just mentioned.
3. Mixing up personal IP with company IP
When a founder codes the MVP or designs branding on their personal laptop without assigning IP to the company, it will not only be a red flag to the investor but could also create future ownership issues.
4. Not documenting early contributions properly
“Sweat equity” without formal agreements leads to confusion. If someone helped for 2 months, how much should they own? Investors want clarity, not emotional or verbal arrangements.
5. Too many ghost shareholders
Early promises to multiple friends, family, or early helpers dilute the company before it has even begun. Clean that up quickly.
Why Investors Care About a Clean Cap Table
A messy cap table is more than just “bad housekeeping.” It signals deeper issues:
- Poor governance
- Legal risk
- Future conflict among founders
- Unclear decision making authority
- Potentially costly clean-up post-funding
It also makes future rounds harder. No investor wants to back a company where ownership is unclear or locked in unnecessary disputes.
What Does a Clean Cap Table Look Like?
Clear founder equity split based on contribution, not emotion
Vesting agreements in place
Advisory equity documented with clear expectations
Employee stock option pool (ESOP) planned and structured
All IP assigned to the company
All convertible notes or similar promises properly recorded
Consistency and integrity, with one version of truth maintained
Bonus Tip: Build Governance Early
Even if it’s just two of you in a small office in Yaba or remote across cities, make sure you document everything, and stop using online templates. Your founder agreements, NDAs, and assignment clauses are not just legal formalities, but proper risk management tools and investor signals.
In Conclusion
If you’re building in the Nigerian tech ecosystem or any high-growth market at all, legal clarity gives you a competitive edge. Savvy investors don’t just back your idea. They back your structure, your team, and your ability to grow without drama.
Make sure you reach out for legal help to get you properly investor ready.
For questions or comments, send us an email at lawyers@syntaxlaw.com.
Syntax Legal Practitioners 