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Employee Exit Waterfall

After liquidation preferences, how much do you actually take home?

Your take-home (after tax)
$0
gross $0
$ / common share
$1
after prefs + carve-out
Carve-out
$0
0% off the top
Distributable pool
$100,000,000
after carve-out
To preferred (all tranches)
$52,938,296
To common pool
$47,061,704
48,050,000 shares
Preferred tranches (most senior first)
NameInvestedMultParticip.Cap ×As-converted sharesPays this exit
$30,000,000pref
$15,000,000pref
$7,938,296participate

Pref = 1x liquidation preference. Participating = double-dip (pref + share pro-rata in common pool, capped at cap×). Tool chooses pref vs convert-to-common for each tranche based on which pays more.

Heads up — Simplified waterfall: assumes 1x non-participating prefs convert if conversion beats their preference, participating prefs double-dip up to their cap, and management carve-out comes off the top before any prefs are paid. Real waterfalls factor in: drag-along thresholds, anti-dilution adjustments, accrued dividends, escrow holdbacks, indemnity baskets, vesting acceleration, and tax withholding mechanics. Use your company's specific term sheet for real numbers.
AI explainer

Ask anything about your result

The math above is deterministic. AI explains what it means — it never recalculates the numbers.

About

When a startup is acquired, common shareholders (employees) get paid last — after every preferred investor takes their liquidation preference. This calculator models the waterfall: at a given sale price, what actually reaches your shares? It's the answer to 'why did everyone celebrate the $500M acquisition while I got nothing?'

How it works

  1. 01Enter the sale price.
  2. 02Enter the total preferred liquidation preference stack ($ amount × multiple — typically 1x non-participating).
  3. 03Enter total common-equivalent shares and your share count.
  4. 04We deduct preferences from the sale price, divide the remainder across common, and show your gross + after-tax payout.

Examples

$100M sale, $80M preferences

Only $20M reaches common. At 50M common-equivalent shares, that's $0.40/share. If you have 50,000 shares: $20,000 gross.

Underwater acquihire

$15M sale, $25M preferences → $0 to common. Sometimes investors carve out 5–10% for the team to keep them around, but legally you can get zero.

FAQ

What's participating preferred?+
Investors get their preference back AND share in the remaining common pool. Doubles the haircut to employees. Less common in modern term sheets but watch for it in down rounds.
What's a carve-out?+
A management/employee bonus pool funded off the top of the sale before preferences. Boards sometimes approve these in low-price exits to retain talent through closing.
Does QSBS apply?+
If your shares qualify (held 5 years, original issuance, C-corp under $50M assets at issue), up to $10M of gain is federally tax-free. See the QSBS checker.

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