Liquidation Preference Simulator

How to Use This Tool

Enter the investment amounts and liquidation preference terms for each round (1x non-participating, 1x participating, 2x participating, etc). Then set an exit valuation. The calculator shows exactly what each investor and the founders receive at that exit price.

Why This Matters

Liquidation preferences determine what you actually take home at exit — not your ownership percentage. A founder with 20% ownership might receive $0 in a $30,000,000 acquisition if the company raised $35,000,000 with participating preferred. This is the most misunderstood and most consequential term in venture financing.

The participation trap

Participating preferred is sometimes called 'double-dip' because investors get their money back first AND share in the remaining proceeds. On a $50,000,000 exit with $20,000,000 in participating preferred, investors get $20,000,000 back plus their pro-rata share of the remaining $30,000,000. With 40% ownership, that's another $12,000,000 — total of $32,000,000 to investors and only $18,000,000 to everyone else. With non-participating preferred, investors would choose their pro-rata share: 40% of $50,000,000 = $20,000,000, leaving $30,000,000 for founders and employees.

What to Do With Your Results

1. 1Model multiple exit scenarios — liquidation preferences matter most at lower exit values.
2. 2Compare non-participating vs. participating terms to understand the dollar impact on your payout.
3. 3Negotiate for non-participating preferred with a reasonable cap on participation if investors insist.