Stage 3 · Pitch and close

Liquidation Preference Calculator

Who gets what in a sale: 1x non-participating vs participating preferred, at five exit values.

Free, no sign-up. Your numbers stay in your browser.

Please note. Educational only. This is not legal advice. Real outcomes depend on the exact wording of your documents, so have a startup lawyer confirm them before you sign. Results are estimates based on what you enter. Full disclaimer · How we build the numbers

What this tool does

A liquidation preference lets investors take their money back (times a multiple) before common shareholders in a sale. Non-participating investors take the better of the preference or converting; participating investors take both.

How to use it

Enter what preferred investors put in and the share they own.
Pick the multiple and the type of participation.
Enter an exit value and read the split, plus four other exit sizes.

The maths, in plain view

Non-participating: max(multiple × invested, ownership × exit)
Participating: preference + ownership × (exit − preference)
Capped: participating, but no more than the cap, unless converting pays more

A worked example

Investors who put in $7M for 35% with 1x non-participating take $10.5M of a $30M sale by converting, leaving founders and common $19.5M (65%). With full participation they would take $15.6M.

Tips

Preferences matter most in small exits. Check the payout at 0.5x and 1x your post-money.
Trade a higher valuation for worse preference terms only after modelling it.

Questions people ask

What does 1x non-participating liquidation preference mean?

In a sale, investors receive either their money back (1x) or what their shares are worth if converted to common, whichever is higher, but not both.

Is participating preferred bad for founders?

It shifts more of the sale proceeds to investors, especially in modest exits, because they receive their preference and their ownership share of what is left.

What is a typical liquidation preference?

1x non-participating, pari passu with other preferred, is the common standard in many venture markets. Multiples above 1x or participation are more investor-friendly.

Keep going

Stage 2 · Plan the raise