What is a liquidation waterfall?

Written By:
March 4, 2022

Liquidation waterfall is a type of scenario modeling to estimate a payout for each individual investor upon a liquidation event. Naturally by having many different classes of shares, each with their own sets of unique rights and preferences, it results in an extremely complex task for your company to try and model it out efficiently and accurately.

For companies, it is simply not worth the time and effort to properly maintain their liquidation waterfall model till the time they absolutely require it, such as needing it for their next financing round. Thus, employees holding equity awards or existing investors find it hard to determine what is their payout till the company decides to commission their next liquidation waterfall.

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About Qapita

Qapita Fintech Pte Ltd (Qapita) is a fintech and legal-tech start-up. Qapita started with digital equity management software for private companies, particularly start-ups. Its software platform is designed to enable capitalization table management, employee stock ownership plan (ESOP) management.

Qapita is building more software products to provide solutions to companies as well as its investors, shareholders and employees. Qapita’s vision is to build a network of stakeholders in the private markets and digitally enable the private capital market transactions on its platform.


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