Model an exit waterfall

Check the records that drive the waterfall

Open Exit scenarios. Before modeling proceeds, review issued shares, preferred-class terms, convertible balances, option strike prices, RSUs, and any recorded acceleration terms. A correct ownership percentage alone is not enough to calculate a sale distribution.

The model uses the current company records as of the Model date: note interest and preferred dividends accrue to it, and a security dated after it is not on the table. Unallocated plan capacity does not receive a holder payout. The liquidation preference guide explains why holders with similar ownership percentages can receive different proceeds.

Enter the sale and award assumptions

1. Give the scenario a descriptive name.
2. Enter the Exit value. The app treats this as the total sale price before escrow, fees, and tax; those deductions are not modeled.
3. Choose whether unvested awards at close Participate or are Cancelled.
4. Review Assume a change of control against the recorded acceleration terms.

The change-of-control assumption applies the app’s recorded acceleration logic. A double trigger assumes the holder is also terminated at close. When all unvested awards already participate, acceleration does not change that participation result. These controls model assumptions; they do not determine the actual deal terms.

Read the results in payment order

Start with the Waterfall summary, then review preferred classes, convertibles, award treatment, and proceeds by holder. Inspect the amount actually paid, not just a preference claim or an as-converted comparison.

In this model, convertible notes are treated as debt repayments at exit. SAFEs are evaluated under the modeled cash-out and conversion outcomes. Preferred-class rights affect preference payments and participation in the remainder. If sale proceeds are insufficient, a claim can exceed its payment.

Breakeven points identify modeled sale values where outcomes change. Select one to inspect the waterfall at that value, then compare results above and below it.

Read participation caps and dividend claims

When a preferred class carries dated participation-cap or dividend terms (see Configure share classes), the waterfall settles every class’s election together: each class takes its preference and accrued dividends off the top and then participates up to each holder’s cap, or converts to common when that pays more, with the other classes’ choices taken into account. The classes table marks a class whose cap is reached and shows its dividend claim beside its preference.

A dividend calculation card per class shows what each certificate accrues on, each dated segment at its rate and convention, and what was declared and paid, so the claim can be reconciled to the charter. Proceeds are conserved: a residual that no holder is eligible to receive, because every participant is capped, is reported as unallocated rather than assigned. A table carrying these terms alongside an unconverted SAFE is refused with the reason; model and close the conversion first. The breakeven card does not run for a table with these terms.

Save distinct scenarios

Select Save scenario to retain the sale value and award assumptions. Saving with an existing name updates that scenario. Use a different name to keep another case for comparison.

A saved scenario retains inputs and the model date, not a frozen copy of the company. It remembers the cap table it was saved against and says so when that table has changed; the results shown follow the current records. Saving a scenario does not record an acquisition, distribute money, or close securities. Reconcile modeled proceeds with the final transaction calculations before using them for a real distribution.