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Liquidation preference waterfall.

Model how exit proceeds actually distribute. Stack multiple preferred series with 1x or 2x preferences, participating or non-participating, see exactly what each holder receives at any exit price, and find the breakpoints where the math changes.

  • Multiple preferred series (Series Seed through D+), each with its own terms
  • 1x, 2x, 3x preferences; participating, non-participating, or capped participation
  • Founder / common holder proceeds and effective ownership at exit
  • Optional emailed PDF report with the full waterfall breakdown
Open the calculator
Waterfall inputs & results

Add a row for each preferred series (latest at the top of the stack is paid first), set the founder / common share count, and pick an exit valuation. Results update live.

Exit scenario
$
Total cash sale proceeds, before fees. Stock-for-stock deals can be approximated using the buyer’s share price.
Include exercised options. The unexercised pool typically does not participate unless options are accelerated and exercised at exit.
Preferred stack (latest first, paid in reverse order of issue)
Waterfall summary
Total exit proceeds
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Total preferred preference paid
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Remaining for common & participating
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Founders / common total
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Common share of proceeds
—
Per-holder breakdown
Holder Preference Participation Total

For non-participating preferred, the calculator picks the higher of preference vs as-converted common, per series, applied via the breakpoint algorithm.

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How the math works

The waterfall, in four steps.

The order matters. Preferred gets paid first, then everyone else splits what’s left, with participating preferred taking from both buckets.

1
Pay preferences in reverse seniority

The latest investors paid first: Series C, then B, then A, then Seed. Each series gets its multiple times its investment, capped at the available proceeds.

2
Non-participating: pick the higher

For non-participating series, compare the preference vs converting to common and taking a pro-rata share. The series takes whichever is higher; the threshold is the conversion breakpoint.

3
Split residual among participating

After preferences are paid, the remainder splits pro-rata among common holders and any participating preferred series, weighted by share count.

4
Capped participation truncates

A 3x cap means a series stops participating once its total payout reaches 3x its investment. Beyond that, additional proceeds go to common only.

Why founders care

The same exit, two very different founder cheques.

A 1x non-participating preference and a 2x participating preference can produce the same founder ownership on the cap table and wildly different proceeds at exit. Run the waterfall before you sign the term sheet, not after the LOI lands.

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FAQ

Common questions

It is the order in which sale proceeds are paid out at exit. Preferred shareholders get paid their preference first, in reverse order of seniority (latest series first). Then the remainder goes to common (founders, employees, exercised options) and any participating preferred.

Non-participating preferred picks the higher of (a) the preference, or (b) the as-converted common share. Participating preferred takes the preference first, then also participates pro-rata with common, as if also converted. Participating is significantly more dilutive to founders at high exit values.

The multiple. 1x means each preferred holder gets back what they invested before common sees any proceeds. 2x means twice the investment, 3x means three times. The vast majority of modern term sheets are 1x non-participating, the founder-friendliest combination. 2x or participating typically signals stretched valuations or downside protection.

A limit on how much a participating preferred holder can receive in total. A 3x cap means once the holder’s combined preference + participation reaches 3x their investment, they stop receiving more. Beyond the cap, the holder is better off converting to common, the calculator picks the higher path.

This calculator assumes share counts are post-anti-dilution, so the share counts shown reflect any prior down-round adjustments. If you have not yet applied a weighted-average or ratchet adjustment, do that first, then load the resulting share counts here.

Not directly. Run the waterfall on the headline proceeds, and separately on the holdback amount, since the holdback flows through the same waterfall when released. Earn-outs depend on the deal structure, often paid as a separate distribution.
Related concepts

The glossary behind the waterfall.

Definitions of the equity instruments and exit mechanics this tool models, plus the sibling calculators for SAFEs, pools, and full priced rounds.

Liquidation preference
Multiple, participation, and seniority
Preferred stock
The instrument that carries the preference
Common stock
What founders and employees actually hold
Anti-dilution
Adjustments before the waterfall runs
Cap table
The input to the waterfall
Term sheet
Where the preference terms are set
Cap Table Dilution Calculator
Model dilution before the exit math
Option Pool Planner
Size the pool that feeds common
Multi-SAFE Batch Simulator
Convert SAFEs into the preferred stack
When the waterfall runs on real shares.

Octelligence tracks every issuance, every series, and every preference term as first-class corporate records, so the waterfall at exit is grounded in the same documents that minutes and signatures live in, not an Excel snapshot.

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