This is another critical model that confounds many entrepreneurs, since it isn't taught well in MBA programs. The experience in designing these models tends to be exhibited by seasoned CFOs who have raised multiple equity rounds and have had close interactions with securities attorneys. Sound shareholder model and capital structures start to separate the "A" quality deals that get funded from the rest of the pack.
From an equity sales perspective, this is the most important model to the investor, for it contains the Equity Product Line. Here the company records the current and future shareholders of the company's equity, in essence forming the capital structure. Since the governance of the entire company rests on the voting rights based on ownership, this is the architectural equivalent to the foundation set into the earth before building the skyscraper.
While securities lawyers execute the documents and often assist in managing these records, it is always the company's responsibility to maintain historic records, as well as forecast investor returns for next stage financing. Founders who omit this critical model, do so at their peril. For it is the founders who have the most to lose and gain from proper development of this critical tool. Of course, major flaws in the design of the shareholder model (like say giving 20% of the company to Uncle Bob who skips town and doesn't add value), result in a restructuring or recapitalization of the company.
VenLogic provides unique advanced macro-driven models that tie into the "Executive Dashboard" by forecasting multiple rounds forward through IPO or liquidity event. When linked to the Deal Model, described in Step 5b below, it becomes a powerful negotiating tool that can have a multi-million dollar impact on the deal.
