Short for capitalisation table, it started life as a spreadsheet and often still is one. Each row is a holder — you, a co-founder, an employee with options, an investor — and each column tracks share class, number of shares, price paid and resulting ownership percentage. It also carries the instruments that are not shares yet: SAFEs, convertible notes, and the option pool set aside for future hires.
It matters because ownership is the one thing you cannot quietly fix later. Every raise, every option grant, every advisor given "a little equity" changes the arithmetic for everyone already on the table, including you. Founders who track it casually discover the real number during a funding round, at the worst possible moment to renegotiate. If you run more than one business, keep a separate cap table per entity — mixing them is how people end up promising the same percentage twice.
A concrete example: you and a co-founder split 10,000,000 shares evenly, 50/50. You reserve 1,500,000 shares as an option pool, which drops you both to roughly 43% each. An investor then buys 2,000,000 new shares for $500,000. Total shares outstanding become 13,500,000, so your 5,000,000 is now about 37%. Nothing was taken from you — the pie grew — but your slice of it is materially different, and the cap table is the only document that says so precisely.