Exit Waterfall
Non-Participating Preferred Better for Founders
Participating Preferred Worse for Founders
Payout by Exit Price
How much founders receive at different exit prices
Payout Breakdown by Round
How each investor and founder group gets paid
| Shareholder | Investment | Preference | Ownership | Payout (Non-Part) | Payout (Participating) |
|---|
Why Liquidation Preferences Matter
If your investors have a 1x non-participating liquidation preference, they get their money back first. If the company sells for less than what they invested, they take everything. 2x participating preferred is especially dangerous — investors get 2x their investment first, then also share in what's left. On a $50M exit with $10M invested at 2x participating, investors get $20M off the top plus their ownership share of the remaining $30M. Read our full guide to liquidation preferences.
Negotiation Tips for Founders
Always push for 1x non-participating preferred. This is the market standard and what YC recommends. If an investor asks for 2x or participating preferred, that's a red flag — they're betting on a down round. Use this calculator to show them exactly how their terms would affect your payout, and push back. See our term sheet negotiation guide.
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