Liquidation Preference Waterfall: what founders really take at a sale

For: Founders weighing a sale or a term sheet. Investors pricing a growth round.

Inputs: sale price, debt and fees, carve-out, up to 6 preferred classes, common, option tranches with strikes

Output: founder dollars vs ownership, cost of your terms in dollars, payout by class, conversion prices

Time: 2 min

At a $300M sale, founders owning 33.9% took 22.4% of the money. One senior capped class cost them $14.1M. Run your charter.

v1.0 · updated Oct 2026

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Exits & liquidity · Founders, Investors · Growth · 2 min · Last verified Oct 25, 2026

Type your sale price and the preference terms from your charter, and the sheet shows what every class, founder and option holder takes after debt, fees and preferences. It also prices your terms: the dollars founders lose versus clean 1x non-participating, and the exact sale price where each class converts.

How to use

Make a copy, open 01 Inputs.
Type the headline price, debt repaid at close, deal fees and any carve-out.
Enter one row per preferred class straight from the liquidation section of your charter.
Enter founder common, other common and granted options with their strikes.
Read the gray answer, then 03 Outputs for every class and 04 Sensitivities for ten other prices.

Common mistakes

Typing the post-money as the sale price. The buyer's headline includes debt it pays off; enter that debt separately.
Counting the unallocated option pool. Ungranted options get nothing at a sale.
Entering preferred shares instead of as-converted shares when the conversion ratio is not 1:1.
Reading a cap as a multiple of the preference when the charter states it as a multiple of dollars invested, or the other way around. The sheet uses dollars invested; multiply if needed.
Assuming a class takes its preference. Above its conversion price it converts, and its preference stops mattering.

Worked example

Example numbers, not a real company

$300M sale, $20M debt, $6M fees, no carve-out, so $274M reaches stockholders. Seed, A and B are 1x non-participating pari passu; a $90M Series C is senior with 1x participation capped at 3x. Founders own 33.9% fully diluted and take $61.3M, or 22.4% of the money. Under clean 1x non-participating pari passu terms they would take $75.4M, so the C terms cost founders $14.1M. Common gets zero below a $171M sale. Series C hits its cap at $1.276B and converts above $1.776B.