Cap Table & Liquidation Waterfall

What this model answers

Operating Plan establishes the capital requirement. Financing Scenarios compares how to fund it. Cap Table & Liquidation Waterfall follows the selected financing into the company’s ownership history and the economic rights that determine who receives what at exit.

• Who owns the company, and how did each financing change that ownership?
• How many shares does a priced round issue, and what happens when supported SAFEs or notes convert?
• How do option grants, warrants and unallocated reserves affect fully diluted ownership?
• What preferences and conversion economics attach to each preferred class?
• How much does each holder and class receive from a given pool of exit proceeds?

A percentage alone cannot answer all these questions. Two investors with the same ownership can have different preference rights. The workbench keeps the share history and the entered rights together, so you can inspect both capitalization and distributions.

Build ownership from transactions

Capitalization is derived from an ordered transaction history. You enter holders, security classes and events; the workbench calculates share quantities and ownership. Transaction date and “Order on this date” determine replay. Editing an earlier event recalculates the later history and surfaces dependencies that no longer work.

Common issuances and transfers

An issuance creates shares for a named holder. A transfer moves issued shares between holders without financing the company. Enter the quantities rather than typing a target ownership percentage.

Priced preferred financing

Pre-money valuation and the pricing share count establish the round price. Investor cash allocations determine new shares in the chosen preferred class. Allocations must equal the round investment.

Options, warrants and pool increases

Pool increases add reserve. Grants consume reserve; cancellations return outstanding options to it. Option and warrant exercises issue underlying common shares. A financing can also top up unallocated reserve to a post-financing target, with the addition priced pre-money.

SAFEs and convertible notes

Record the instrument before conversion. Supported pre-money cap-and-discount SAFEs and notes can convert in a priced round. Notes accrue ACT/365 simple interest; principal and interest convert together at the lower applicable cap or discount price. Conversion creates traceable preferred classes.

1. Choose your starting point

   Open a saved model from My Models, create a separate Cap Table from a reviewed Financing Scenarios proposal, or use “Start a new model” → “Start blank”. “Use illustrative example” opens a separate demonstration with Seed and Series A rounds; it is different from the pre-seed example below.

2. Define the company and participants

   In “Overview”, name the model and company. In “Holders & securities”, use “Add holder” for founders and investors, then create the common and preferred classes. Select the model denomination before entering amounts.

3. Record and review the history

   In “Transactions”, use “Add another transaction” for initial common issuances and “Configure a financing” for a priced round. Enter dates, quantities and terms, review the proposed transaction and capitalization, then apply it. Repeat in chronological order.

4. Inspect ownership, then proceeds

   Open “Capitalization” to compare ownership bases and inspect round calculations. Then use “Exit waterfall” to enter distributable equity proceeds and inspect allocations. “Model boundaries” explains the workbench’s conventions.

Separate holders from security rights

A holder is a person or entity. A security class defines the economic rights shared by its securities. A holder can own several classes. Holder categories such as Founder or Investor are descriptive; they do not create special payout rights.

Common and preferred

Common participates in the residual equity pool. Preferred can carry a liquidation preference, participation terms and conversion rights. Original issue and current conversion prices are derived through financing history.

Liquidation preference and seniority

The preference multiple applies to original issue-price capital. Lower numbered seniority tiers pay first. Classes in the same tier share a shortfall in proportion to their preference claims.

Participation

Non-participating preferred takes its preference or converts. Participating preferred can also share residual proceeds. A capped participation multiple includes the preference; conversion relinquishes both preference and cap.

Conversion rights

The workbench models voluntary class-wide conversion economics at exit. Preferred common equivalents reflect original issue price divided by current conversion price. Conversion economics do not rewrite the number of issued preferred securities.

Anti-dilution

None, broad weighted average, narrow weighted average and full ratchet are supported conventions. Weighted-average protection requires an explicit capitalization basis for each protected class. The model does not infer that basis from a legal label.

Read the capitalization views

Unallocated reserve belongs in the fully diluted denominator but is not a holding allocated to an invented employee. An exercised option becomes issued common and ceases to be an outstanding option; it is not counted twice.

Use “Export current cap table CSV” and “Export transaction history CSV” for results and history. “Export model JSON” preserves the model assumptions and transactions for later import; CSV is not a substitute for the editable model.

Worked example: carry the $155,000 round forward

This illustrative USD example continues the priced-equity alternative from Financing Scenarios. Founder A begins with 7,000,000 common shares and Founder B with 3,000,000. There are no options, warrants, reserves or converting instruments in this example. The figures demonstrate mechanics; they are not a financing recommendation.

The investor receives Pre-Seed Preferred: 1x liquidation preference, seniority tier 1, non-participating, anti-dilution None, and voluntary conversion. These terms govern the exit analysis; the 7.193% ownership figure alone does not determine the investor’s proceeds.

To reproduce it manually, issue the two founders’ common shares, add the investor and preferred class, then configure the financing with the valuation, investment and investor allocation above. Inspect the preview before applying. A Cap Table created from the reviewed Financing Scenarios proposal already carries the opening capitalization and proposed issuance; do not add the same round twice.

Follow rights through the liquidation waterfall

Enter “Distributable equity proceeds” after deducting debt, senior claims and transaction costs. This is the pool available to equity, not enterprise value. All distributions are pre-tax.

1. Allocate preference claims

   The waterfall pays preferred claims by seniority. An underfunded senior tier can leave junior classes and common with no proceeds.

2. Evaluate conversion and residual participation

   The model evaluates interacting class conversion elections and allocates residual proceeds to eligible common equivalents. A preferred class that converts relinquishes its preference. Participation caps limit capped preferred proceeds and redistribute remaining value.

3. Read class and holder distributions

   Class results separate preference, participation and conversion proceeds. Holder results aggregate each holder’s positions across classes. Gross MOIC (multiple of invested capital) compares proceeds with modeled investment basis; it appears only where that basis is fully known and positive.

4. Check reconciliation

   Total class and holder distributions must reconcile to available equity proceeds within numerical tolerance. The reported residual is arithmetic reconciliation, not an extra economic allocation. Invalid or non-conserving outcomes are rejected.

Ownership percentage and proceeds percentage can differ because preference is paid before residual participation. In the example, a low exit can make the investor’s preference more valuable than its converted share of proceeds; at a sufficiently high exit, conversion can be more valuable. Changing the exit input lets you inspect that trade-off.

Understand the model’s boundaries

The workbench models entered economic assumptions. Actual legal rights depend on governing corporate documents, financing agreements and option plans. This is educational and analytical modeling, not legal, tax or accounting advice or a legal stock register.

• Post-money SAFE conversion, SAFE/note liquidity-event rights and MFN terms are not modeled.
• Dividends, vesting schedules, automatic exit exercise, tax, escrow, earnouts and contingent distributions are outside V1.
• The exit model evaluates up to eight active preferred classes with voluntary conversion rights. Class-wide economic elections do not interpret legal voting or consent requirements; multiple stable outcomes are disclosed.
• A pool target combined with triggered anti-dilution protection is rejected rather than approximated.
• Fractional shares and sub-cent prices are retained analytically. The model does not apply contractual whole-share rounding or foreign-exchange conversion.

• Model capitalization & exits →
• Revisit the financing structure comparison →