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🌍 US & Europe · Cap table & fundingExit waterfall
Also called: waterfall, distribution waterfall
In one line
The order in which sale proceeds are paid out at an exit — preferences and senior claims first, common shareholders last.
In plain English
When the company is sold, the money flows down a 'waterfall': investors collect their liquidation preferences first, then remaining cash trickles down to common holders. It determines what you actually receive.
If you were explaining it to a 5-year-old
The prize money pours down a set of buckets. The top buckets (investors) fill first; you only get what overflows into the bottom bucket.
Why it matters when you sell
The waterfall is why a big exit can still mean modest proceeds for employees. Modelling it shows what your shares are truly worth in different sale prices.
Related terms
Put it to use
When you're ready to go deeper, there's an optional Equity Toolkit and Report.
Sources
A general market-practice term. See how we define and source the glossary in our methodology. General information, not advice.
Educational information only — not financial, tax or legal advice, and not an offer to buy or sell any security. Definitions are general; your own documents and local law govern your situation. PrivateTechShares is independent and not a broker or marketplace.