Free Exit Waterfall Calculator
Model how exit proceeds flow through your cap table. See what founders, employees, and investors receive based on liquidation preferences and participation rights.
Exit Scenario
Common Stock
Preferred Stock
Enter exit value and cap table details to calculate waterfall distribution
How to Use the Exit Waterfall Calculator
Enter Investor Classes
Add each investor class (Series A, B, C, etc.) with their investment amount, ownership percentage, and liquidation preference multiple (1x, 2x, etc.).
Configure Participation Rights
For each class, specify if preferred stock is participating or non-participating. Set participation caps if applicable (e.g., 3x cap).
Set Exit Value
Enter the total exit proceeds from the acquisition or IPO. Try different exit values to see how proceeds distribution changes at various outcomes.
Review Waterfall Distribution
See how proceeds flow through each class based on seniority, preferences, and participation. View what founders, employees, and each investor class receive.
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Understanding Exit Waterfalls
When a startup exits through acquisition or IPO, proceeds don't simply divide by ownership percentage. Preferred stockholders have negotiated rights that determine who gets paid first and how much. Understanding your waterfall is crucial for founders and employees.
Key Terms
- Liquidation Preference: Amount investors receive before common stockholders (typically 1x investment)
- Participating: Investors get preference AND share in remaining proceeds
- Non-Participating: Investors choose preference OR pro-rata share (whichever is higher)
- Seniority: Order in which investor classes get paid (later rounds typically senior)
Frequently Asked Questions
What is a liquidation waterfall?
A liquidation waterfall determines how proceeds from an exit (acquisition, IPO, or liquidation) are distributed among shareholders. Preferred stockholders get paid first based on their liquidation preferences, then remaining proceeds go to common stockholders.
What is a liquidation preference?
Liquidation preference gives investors the right to receive their investment back (often with a multiple like 1x or 2x) before common stockholders receive anything. A 1x preference means they get their investment back first; 2x means they get double.
What is participating preferred stock?
Participating preferred means investors get their liquidation preference AND a pro-rata share of remaining proceeds. Non-participating preferred must choose between their preference or converting to common for pro-rata share - they get whichever is higher.
What is a participation cap?
A participation cap limits how much participating preferred investors can receive. For example, a 3x cap means they receive at most 3x their investment (preference + participation combined). Without a cap, they participate fully in all upside.
How does seniority affect the waterfall?
Senior preferred stock gets paid before junior preferred. Typically, later rounds (Series B, C) are senior to earlier rounds (Seed, Series A). In a down exit, senior investors may receive full preference while junior investors get little or nothing.
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