Exit Waterfall Skill

A cap table is a promise about percentages; an exit waterfall is what actually happens to the money. The difference — liquidation preferences, participation, option strikes — routinely stuns founders at the worst possible moment. This skill computes the waterfall across exit prices and, more importantly, translates it: the price below which your shares are worth nothing, and the price where everyone finally converts.

What This Skill Produces

• The payout table — every stakeholder's dollars at each exit price, with conversion decisions shown
• The cliff points — where preferences stop dominating, where options come into the money
• The plain-English reading — "you need a $X exit for your common to mean anything" stated as a sentence

Required Inputs

Ask for these if not provided:

• Share classes — for each: name, share count, type (common / preferred / options); for preferred: amount invested, preference multiple, participating or not; for options: strike
• Exit prices to test — or default to a spread around the last round's valuation (label it as a default)

Programmatic Helper

The math ships as a deterministic script — run it rather than arithmetic-by-hand:

python3 scripts/exit_waterfall.py cap.json
python3 scripts/exit_waterfall.py cap.json --exit 50000000 --json

Input shape and worked example are in the script docstring. It brute-forces the conversion equilibrium (each non-participating preferred converts only when as-converted beats its preference) and applies the treasury method to options. Stated simplifications: preferences are pari passu (no seniority stacking) and participation is uncapped — flag both when the real cap table differs, and say the numbers shift accordingly.

Formula (readable form)

• Non-participating preferred takes max(preference, as-converted value) — preference = invested × multiple
• Participating preferred takes preference + pro-rata of the remainder (why "participating" is the term sheet word worth fighting)
• Options exercise only when per-share common value > strike; strike proceeds join the pool