Liquidation preference calculator

Run the exit waterfall for up to three preferred rounds — 1x non-participating, participating or capped, stacked or pari passu — and see what founders and employees actually take home.

Common (founders and employees) takes home—

The waterfall
Holder	Takes	Payout	Of exit

Common’s take at other exit values
Exit	Common gets	Of exit	vs. ownership

For planning and negotiation prep, not legal, tax or investment advice. Real documents differ in the details — check the numbers with your counsel against the actual term sheet. Everything runs in your browser; nothing you type is sent anywhere.

How the waterfall works

When a venture-backed company is sold, preferred stockholders — the investors — are paid before common stockholders, the founders and employees. A liquidation preference sets how much they get first. The calculator pays out in this order:

Preferences. Each preferred round that doesn’t convert takes its multiple × the amount it invested. Under stacked seniority the latest round is paid first; under pari passu every round shares pro rata to what it is owed.
The remainder. What’s left is split by as-converted ownership among common, any round that converted, and any participating round.
The choice. A non-participating round converts to common when its share of the exit beats its preference. A capped participating round stops at its cap (3x means three times its money, preference included), and converts if its plain ownership share would beat the cap.

Those choices depend on each other — one round converting changes what the others get — so the calculator re-runs the waterfall until no round would do better by switching.

Why founders should model this before signing

At large exits, 1x non-participating preferred barely matters: everyone converts and the money is split by ownership. The damage is in mid-sized exits. If investors have put in $10 million and the company sells for $15 million, the preferences come off the top and common shares what’s left. The “common’s take at other exit values” table shows where your own terms stop mattering. Participation and stacked multiples push that point much higher. Read liquidation preference explained for how often each structure appears in current term sheets.

Simplifications

This models a single class of common stock, treats unvested options and the unissued pool as part of common, and ignores deal costs, debt, management carve-outs and earn-outs. Enter the exit value as what reaches shareholders. To work out the ownership percentages to put in here, use the startup dilution calculator.