Waterfall Analysis Calculator
The formula
What the exit waterfall tells you
The complete distribution order for a sale: stacked preferences, residual by ownership, with every preferred holder picking the richer of preference and conversion. Common's remainder is what employees see.
Calculation: Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion). Enter your inputs and every substitution is shown below the result.
Reading the result
Run the range, not the headline: waterfalls are nonlinear, and a 20% smaller exit can zero the common entirely.
Rules of thumb: Below total preferences, common (and employees) get nothing
Limitations and best practice
Options underwater at their strike expire worthless in a low exit — include real strikes when modeling employee proceeds.
This calculator gives an estimate based on standard formulas; it is not professional financial, medical, legal or engineering advice. Verify anything you plan to act on with a qualified professional and your own records.
Frequently asked questions
Do founders get preference?
What is a "full" waterfall?
Source & methodology
Standard preferred-stock waterfall practice.
How Waterfall Analysis works — and what your result really means
Impact numbers only survive scrutiny when the boundary and the coefficients are visible — that is the design here. There are plenty of pages about Waterfall Analysis; almost none of them show the working. This one does: the formula, every input, a fully computed example, and a sensitivity analysis calculated live from this engine’s own defaults.
It helps to separate the mechanics from the interpretation. The mechanics are fixed: Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion). Anyone, anywhere, entering the same inputs will get the same $55,311,445. The interpretation is where experience counts: whether $55,311,445 is good, normal or alarming depends on comparisons covered below, and that is the part most articles about Waterfall Analysis never explain.
In Business & Entrepreneurship the same quantity is often quoted under two or three different conventions. The formula printed above fixes one convention and applies it consistently, which is what makes results from this page comparable with each other.
Every figure in the prose is generated by the engine rather than written beside it — the worked example resolves to common holders receive = $55,311,445 on the default inputs, and the sensitivity section ranks the inputs that move the result — Exit value first, at ≈11.9 % of the headline for a ten-percent error either way in that input. Read the sections in order and you will be able to reproduce every figure by hand.
Every input in Waterfall Analysis, and what it does to the answer
The engine implements a single stated model: Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion). There is no hidden coefficient and no login-gated precision — the formula printed is the formula executed, which is also what makes the result citable.
Exit value ($) (example value 101,400,000) is a numeric input whose unit is fixed by the label; a wrong unit is a wrong answer wearing a plausible disguise. Replace the example with the figure from your own records — the tool recomputes instantly and the printed steps follow your numbers.
Round 1 invested ($) (example value 3,848,364) is a quantity rather than a category — precision here is cheap and worth having. This input feeds the formula directly; a defensible figure here is worth more than false precision anywhere else.
Round 1 converted % (example value 10) is a plain measured quantity — the unit shown in the label is the unit the formula expects. Check the convention first: if the source says “6.5 % per year”, type 6.5 and let the formula do the rest.
Round 2 invested ($) (example value 12,457,106) is a quantity rather than a category — precision here is cheap and worth having. Replace the example with the figure from your own records — the tool recomputes instantly and the printed steps follow your numbers.
Round 2 converted % (example value 26) is a quantity rather than a category — precision here is cheap and worth having. Enter it exactly as your document states it — quoted annual, monthly and effective rates are three different numbers.
Common + founders (%) (example value 65) is a quantity rather than a category — precision here is cheap and worth having. Check the convention first: if the source says “6.5 % per year”, type 6.5 and let the formula do the rest.
The default Waterfall Analysis calculation, written out in full
Abstract formulas are hard to trust, so here is the complete substitution using the default inputs, written the way an examiner would want it. Starting figures: Exit value ($), Round 1 invested ($), Round 1 converted % , Round 2 invested ($). The computed common holders receive comes out at $55,311,445, which the interpretation band labels “Preferred take with conversion rights: $10,140,000 and $26,364,000”.
- Preferences: $3,848,364 + $12,457,106 leave $85,094,530 for the 10/26/65 split
- Each preferred then prefers max(preference, conversion) — this is the full waterfall logic
Preferences paid — $16,305,470. If your inputs change, this is usually the first companion figure to move.
Residual for common — $85,094,530. Compare it against the main result of $55,311,445 before drawing conclusions.
Round 1 total (better path) — $10,140,000. Read next to the headline, this is the figure that shows the shape of the trade-off.
Round 2 total (better path) — $26,364,000. This is the number experienced users quote when the headline alone would mislead.
Keep this worked example open while you enter your own figures: matching the shape of the substitution is the fastest way to spot a unit or convention mistake.
Scenario table: Waterfall Analysis at ±10 % and ±20 % of the key input
Single-point answers invite false confidence, so the same engine was run across a band around the input that matters most here. Each row is a full recalculation of Waterfall Analysis, not an interpolation.
| Exit value setting | Common holders receive |
|---|---|
| 80 % of the example value | $42,129,445 |
| 90 % of the example value | $48,720,445 |
| example inputs | $55,311,445 |
| 110 % of the example value | $61,902,445 |
| 120 % of the example value | $68,493,445 |
The corridor runs from $42,129,445 to $68,493,445 across that band — which is the range worth planning inside rather than the single $55,311,445 point estimate. Reproduce it in the form above by editing Exit value alone; the substitution steps will follow your figures exactly.
Sensitivity: which inputs change Waterfall Analysis the most
This list was computed for this specific engine just now: each numeric input was nudged ±10 % while every other field held its example value, and the common holders receive was recalculated from scratch. For Waterfall Analysis the ranking is measured rather than guessed, and it belongs to these defaults: shift the starting point and the order can shift with it.
- Exit value: ten percent up gives $61,902,445, ten percent down gives $48,720,445 — ≈11.9 % of the common holders receive either way
- Common + founders +10 % → Waterfall Analysis = $60,842,589 · −10 % → $49,780,300 (the common holders receive shifts ≈10.0 %)
- Nudge Round 2 invested by ±10 % and Waterfall Analysis lands between $54,501,733 and $56,121,156 (sensitivity ≈1.5 %)
- Round 1 invested: ten percent up gives $55,061,301, ten percent down gives $55,561,588 — ≈0.5 % of the common holders receive either way
Exit value is the dominant lever here: ten percent either way moves the result by about 11.9 %, from $48,720,445 to $61,902,445. Spend your verification effort there first, and treat Common + founders as the second priority (≈10.0 % per ten percent). Everything below that can stay approximate, which is a licence to stop chasing data that would not change the decision.
Interpreting the Waterfall Analysis verdict
The value above only becomes useful the moment you know what it is being measured against. The default case lands in the “Preferred take with conversion rights: $10,140,000 and $26,364,000” band, and bands are deliberately wide because real situations overlap. How much of that band is luck? On Exit value alone ten percent either way covers $48,720,445 to $61,902,445. The practical reading rules: compare against your own history before comparing against other people; treat band boundaries as zones, not walls — one point on the wrong side of a threshold rarely changes a real outcome; and when a companion output contradicts the headline, believe the pair.
Where Waterfall Analysis sits next to similar measures: this tool answers “how much is the Waterfall Analysis”, while the related calculators answer “what do I do about it”. Reading the result alone tends to over-weight a single snapshot; pairing it with the companion tools above turns the number into a decision.
Why Waterfall Analysis results go wrong — and how to prevent it
Options underwater at their strike expire worthless in a low exit — include real strikes when modeling employee proceeds. This calculator gives an estimate based on standard formulas; it is not professional financial, medical, legal or engineering advice. Verify anything you plan to act on with a qualified professional and your own records.
Treating the example inputs as a recommendation. They are a demonstration of the mechanism — a decision-grade Waterfall Analysis begins the moment your own figures replace them.
Attention is also misallocated between fields. Having measured this engine, we can say where it belongs: Exit value first, everything else second.
Another is comparing across contexts: a Waterfall Analysis computed with one set of conventions should never be lined up against a figure computed with another. Check the inputs behind both before ranking them.
Six things to confirm before acting on Waterfall Analysis
- State, in one sentence, which convention each rate, unit or period in the form is using.
- Record the date and the inputs alongside the number so future-you knows what was assumed.
- Check Exit value before anything else: it is the measured dominant input, ≈11.9 % of Waterfall Analysis per ten percent.
- Note the date and the inputs beside the number so the figure can be audited later.
- Recompute once with the dominant input deliberately set low, and see whether the decision changes.
- Run the ±10 % stress on the top two levers and check that your conclusion survives both.
How to use the Waterfall Analysis tool properly
The tool does the arithmetic; the routine below is what makes the arithmetic trustworthy. Five steps, a minute total — and afterwards you will know not just what the number is, but which assumption produced it.
Step 1 — one document, one pass. Open the statement, label or record that holds exit value ($), round 1 invested ($), round 1 converted % , round 2 invested ($), round 2 converted %, common + founders (%) and transcribe straight into the form. Transcription from a single source removes the mismatch errors that appear when figures are assembled from three different places. A figure with a date beside it becomes evidence; without one it stays an anecdote.
Step 2 — baseline before exploration. Get one defensible Common holders receive on screen before you start nudging numbers. Without a baseline, every variation looks interesting and none of them means anything. The point of transparency is that a reader can disagree with a specific line rather than with you.
Step 3 — play with the inputs on purpose. Ten percent up, ten percent down, one field at a time. Within a few minutes you will know this calculation better than most people who quote its results. Write the figure down before moving on; memory flatters whichever number you saw last.
Step 4 — run the scenario trio. Expected, pessimistic, optimistic. The gap between pessimistic and expected is the number to plan against; the optimistic result is useful only as a ceiling. Write the figure down before moving on; memory flatters whichever number you saw last.
Step 5 — save the story with the figure. A number without its inputs and its date is unusable within a quarter. Record $55,311,445, the assumptions behind it, and today’s date; your future self will be auditing a stranger’s arithmetic. Rounding early is the quietest way to introduce a permanent error.
Who actually uses Waterfall Analysis — and when
Numbers earn their keep in conversations, and Waterfall Analysis is no exception. In Business & Entrepreneurship discussions around Startup Metrics, this figure decides whether an option stays on the table: it converts an opinionated debate into an arithmetic one, and arithmetic is the only referee both sides accept. Write the figure down before moving on; memory flatters whichever number you saw last.
The companion outputs — Preferences paid and Residual for common — exist for the second stage of that screen: the headline sizes the prize, while the companions describe the trade-off you are accepting to get it. Note the assumption you are least sure about; that is where the real risk lives.
There is a personal-administration use people overlook: periodic self-checking. Waterfall Analysis quietly drifts as life changes — rates move, bodies change, costs compound — and re-running it a few times a year catches drift while correction is still cheap. The fastest sanity test is to guess the answer first and see how far the calculation disagrees.
The questions that come up most about Waterfall Analysis
What affects Waterfall Analysis the most?
The short answer: Exit value. The longer answer is the sensitivity table on this page, where every numeric input was probed by ten percent and the common holders receive recalculated — Exit value moved it furthest, by roughly 11.9 % ($48,720,445 to $61,902,445).
Which matters more: common + founders or exit value?
Exit value, by a factor of about 1.2. Concretely: ten percent on Exit value is worth ≈11.9 % of Waterfall Analysis, the same nudge on Common + founders only ≈10.0 %. That ranking is re-computed for each page from that page’s own defaults.
What is a typical Waterfall Analysis?
There is no honest universal average for Waterfall Analysis, but there is a reference point: the defaults on this page produce $55,311,445 (Preferred take with conversion rights: $10,140,000 and $26,364,000). Replace the inputs with your own and compare — that comparison is the useful meaning of “typical”.
How do I calculate Waterfall Analysis by hand?
Use the stated model — Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion) — and substitute in the order the tool prints (it starts from Preferences: $3,848,364 + $12,457,106 leave $85,094,530 for the 10/26/65 split). On the example inputs the hand route lands on $55,311,445, exactly what the calculator shows. A spreadsheet reproduces it in two or three cells; doing it once by hand is what makes the automated answer trustworthy.
What happens to Waterfall Analysis if exit value changes by 10 %?
Try it in the form above and the printed substitution will follow you; the pre-computed answer for the defaults is $48,720,445 to $61,902,445 across the ten-percent probe, i.e. ≈11.9 % sensitivity on the common holders receive.
Is the Waterfall Analysis result of $55,311,445 good or bad?
The tool answers “what”, not “whether”: $55,311,445 carries the verdict “Preferred take with conversion rights: $10,140,000 and $26,364,000” for the default case, which is a starting interpretation rather than a verdict on your situation. Re-run with your own figures and compare the bands.
Should I use Waterfall Analysis before launching?
Yes — a Waterfall Analysis run on honest inputs before spending is the cheapest consulting an entrepreneur can buy. Re-run at every pricing change; the number moves more often than founders expect.
How often should I check Waterfall Analysis?
Whenever an input changes by more than a few percent, and otherwise on the rhythm of your decisions — before a purchase, a review, a renewal. Waterfall Analysis is a snapshot, not a subscription; stale snapshots are the most common silent error in Business & Entrepreneurship planning.
Do founders get preference?
Only their preferred personally; common founders stand behind the entire stack.
What is a "full" waterfall?
Preference → participation → pro-rata residual with conversion tests per class — exactly this model.
Does this Waterfall Analysis tool store my numbers?
No. The entire calculation runs in your browser session; nothing entered above is transmitted or saved, which is the correct behaviour for sensitive Business & Entrepreneurship figures and the reason you can re-run this page as often as you like.
Glossary for Waterfall Analysis
- Preferences paid
- $16,305,470 on the example inputs — a companion figure printed beside the headline of Waterfall Analysis so that no result is read in isolation.
- Residual for common
- $85,094,530 on the example inputs — a companion figure printed beside the headline of Waterfall Analysis so that no result is read in isolation.
- Round 1 total (better path)
- $10,140,000 for the Waterfall Analysis worked case; it sits next to the main result because it carries context the headline leaves out.
- Common holders receive
- The primary output of this tool: $55,311,445 for the default inputs, computed exactly from Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion).
- Worked example
- The calculation written out in full so that nothing on this page has to be taken on trust.
- Verdict band
- A named zone on the range of plausible results; the example inputs land in “Preferred take with conversion rights: $10,140,000 and $26,364,000”, and your inputs may not.
- Sensitivity (±10 %)
- How far the Waterfall Analysis moves when a single input is nudged ten percent either way; the ranked list on this page is computed live from this engine.
The provenance of this Waterfall Analysis calculation
The model is published arithmetic implemented exactly as written: Pay stacked preferences, split residual by ownership, then let each preferred class take max(preference, conversion). Source of record: Standard preferred-stock waterfall practice. Any other implementation of this model should return the same figure for the same inputs. If one does not, the difference is in its assumptions — which this page prints and that one probably does not.
Treat the output as a precise answer to the question you typed: exact arithmetic, transparent formula, published source, no hidden rounding. What that buys you is reproducibility — two people, two browsers, the same arithmetic, and a printed trail from inputs to result that either of them can audit.
Turning this Waterfall Analysis into a decision
Record the figure with today’s date and re-run quarterly; the trend is the actionable number, not the snapshot.
Whoever you are (households and teams measuring consumption or impact), the next step is the same: replace the example inputs with your own, note the date, and re-run whenever a figure moves. In Business & Entrepreneurship, a dated figure is a trend, and an undated one is a rumour.