When the company sells, who actually gets paid what?

The sale

Preferred stock (investors)

One row per series. Shares are as converted to common. Seniority 1 is paid first; equal numbers are paid pari passu. Leave unused rows blank. The cap is the total payout as a multiple of the money invested (used only for capped participation).

Common stock and options

Enter your terms, then click Run the waterfall.

Result

Breakpoints

The same terms at other sale prices

What stands out

How it is calculated

Net proceeds are the sale price less debt, fees, and any carve-out. Preferred series that have not converted are paid their claim (money invested times the multiple, plus simple cumulative dividends) in order of seniority; equal seniority shares a shortfall in proportion to the claims. What remains is shared per share among common stock, converted preferred, participating preferred (up to any cap) and in-the-money options, whose share is worth the per-share value less their strike. Each series then chooses whether to convert to common, and the tool repeats until no series can do better by switching, which is how the conversion breakpoints are found.

Not modelled: escrows, earn-outs, taxes, warrants, unconverted notes and SAFEs, unvested equity and acceleration, anti-dilution adjustments, pay-to-play, and any term not in the boxes above. Unverified: checked by hand calculation and unit tests only; compare against your charter, your counsel, and the acquirer's own funds-flow before relying on a figure. New tool, recently graduated from screening; expect rough edges.

Common questions

What is a liquidation preference?

A right, negotiated in a financing, for a series of preferred stock to be paid a set amount, usually the money invested times a multiple such as 1x, before common stockholders receive anything when the company is sold. Some series then also share in what is left (participating preferred), some only take the greater of the preference or their as-converted share (non-participating).

What is the difference between participating and non-participating preferred?

Non-participating preferred chooses: take the preference, or convert to common and share pro rata, whichever pays more. Participating preferred collects the preference and then also shares in the remainder as if it had converted, often up to a cap such as 3x the money invested, after which it would rather convert if that pays more.

What does seniority mean in a waterfall?

Senior series are paid in full before junior ones see anything. Series with the same seniority number are pari passu: if the money runs short they share it in proportion to their claims. Enter 1 for the series paid first, 2 for the next.

Why do options pay less than shares?

An option holder pays the strike price to buy the share, so the value is the price per common share minus the strike. If the sale values a common share below the strike the options are worth nothing at that price.

Why is my percentage of the company not my percentage of the sale?

Because preferred terms, debt, fees and any management carve-out are paid first. At modest prices common stock and options can get far less than their ownership share, and at high prices the gap closes as preferred series convert.

What is a management carve-out?

A slice of the sale proceeds set aside for managers or employees, paid before the preferred preferences. It usually matters when the sale price is near or below the preference stack. Enter the percentage of proceeds after debt and fees.

What does this leave out?

Escrows and holdbacks, earn-outs, taxes, pay-to-play and other special terms, warrants, convertible notes and SAFEs that have not converted, unvested equity, anti-dilution adjustments, and the exact wording of your charter. It reads the terms you enter; the legal documents control. Read your charter and get advice from a lawyer before relying on any figure.

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