Fund Structure
Last updated
Quick Answer
A detailed calculation showing how exit proceeds are distributed among all shareholders based on their specific rights, preferences, and terms.
A waterfall analysis models the step-by-step distribution of proceeds from a liquidity event to each class of shareholders. It accounts for liquidation preferences (participating vs. non-participating, seniority vs. pari passu), conversion rights, cap table ownership, and any special provisions like management carve-outs. The waterfall determines what each shareholder actually receives at different exit valuations.
In Practice
The waterfall analysis revealed that at a $100M exit, common shareholders would receive only $15M due to $85M in stacked liquidation preferences — but at $300M, they'd receive $150M as preferred investors converted to common.
Why It Matters
Waterfall analysis is the only way to understand what an exit actually means for each stakeholder. The same exit value can produce dramatically different outcomes depending on the cap table structure and investor terms.
VC Beast Take
If you haven't run a waterfall analysis at multiple exit scenarios, you don't actually know what your equity is worth. The cap table tells you ownership; the waterfall tells you economics.
Best Cap Table Management Software in 2026: Carta vs Pulley vs AngelList
A detailed 2026 guide comparing the six leading cap table management platforms—Carta, Pulley, AngelList Stack, Shareworks, Ledgy, and LTSE Equity—covering features, pricing, ideal use cases, and how to choose the right tool for your startup stage and geography.
Private Equity Software: Best Tools for PE Firms in 2025
The complete PE software stack — from CRM and deal flow to portfolio monitoring, fund administration, and LP reporting. Pricing, best-fit guidance, and how to build your tech stack on a budget.
Equity Valuation Calculator: How to Value Private Company Shares
How to value private company shares: the five main methodologies (comps, DCF, VC method, Berkus, OPM), what drives equity value, and the calculators that make the math accessible.
Remote Venture Capital Jobs: Where to Find Them and How to Get Hired
Remote VC jobs exist — but not in every role or at every firm. Here's where to find them, which roles are actually remote-friendly, and how to get hired without being local.
Private Equity Fund Administration: What It Is and Who Does It
Fund administration is the back-office infrastructure that keeps a PE fund running. Here's what it covers, who the major providers are, what it costs, and how to choose the right one.
Series A Funding: What It Means, How Much You Can Raise, and How It Works
Series A funding is the first major institutional round. Learn what it means, how much you can raise, what investors look for, and how the process works.
A waterfall analysis models the step-by-step distribution of proceeds from a liquidity event to each class of shareholders. It accounts for liquidation preferences (participating vs. non-participating, seniority vs.
Understanding Waterfall Analysis is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Waterfall Analysis falls under the fund-structure category in venture capital. This area covers concepts related to how venture capital funds are organized, managed, and governed.
Newsletter
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?