Free calculator · Venture & Startup Finance
Liquidation Waterfall, Who Gets Paid at Exit
Splits an exit between preferred and common shareholders under non-participating, participating, and capped participating preference structures, including the point where the preferred converts to common. Inputs are the preferred investment, liquidation preference multiple, as-converted ownership, exit value, and the participation cap.
By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026
From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.
AI training for finance teams · Consulting · The 10 Laws of Finance
Interactive Tool
Liquidation Waterfall, Who Gets Paid at Exit
Preference type
Preferred receives
$4.0M
takes the preference
Common receives
$4.0M
founders & employees
Preference amount
$4.0M
1× on $4.0M
As-converted value
$3.2M
40% of the exit
Preferences are the most impactful term for founders and common holders. Participating preferred takes its money back and then shares the rest; non-participating takes the preference or converts, whichever is greater; capped participating participates only up to the cap, then converts if conversion beats it, the cap binds at large exits, not modest ones. Multiple preferences (2×, 3×) can consume a modest exit, leaving little for common.
Learn the concept
This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.
When to use this measure
Embed this calculator on your site
Free to embed on any site; the widget includes an attribution link back to this page.
One useful finance email a week
A tool, a number worth knowing, and what it means for your money or your business. From Devon Coombs, CPA, MBA. No spam, unsubscribe anytime.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.