A virtual cap table is a method of keeping track of contributions to a startup before it exists.[1]

Each member of the team decides how much time they can contribute and what their “full time rate“ would be.

For example: A contributor named Kylie decides she can invest 1/2 of her time now. In her last full time job, she was comfortable making $5k per month. She’s at a point where she can do this for 6 more months, after that, she’d need to start making more money one way or another.

The company would record a $2,500 contribution from Kylie on the Virtual Cap Table for her 1/2 time contribution of her full time rate of $5k per month.

The company would

Record each person’s contributions this way. Kylie $5k, Sara $5k, Josh $5k, John $5k etc.
Create a budget for how much salary would be required if all 4 people were paid their full time monthly rate - $20k.
Have a budget to cover any cash payments that do need to be made.

The team would then seek ways to bring in capital. There are 2 ways:

Create a 📝Profitable revenue stream;
Convince investors they should give you money to do #1

At some points in this process, you may need to focus more time than you’d like on revenue streams that aren’t directly aligned with your long term goals. Balancing the need for cash with the desire to invest and move faster is an endurance event.

[1] [after it exists this method of accounting would run into some 409a deferred compensation issues]

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