Startup Exit Waterfall: Who Gets Paid in Order
Debt and preferred usually clear before founders and employees see common proceeds.
USD
Gross exit proceeds$40M
Illustrative M&A price
Debt + deal expenses−$2M
Senior claims first
Preferred liquidation prefs−$18M
Stacked Series Seed + A (illustrative)
Remaining for as-converted / common$20M
Then participation or conversion rules apply
Simplified. Participating preferred can take preference and then share remaining proceeds. Always model your real stack — see the exit waterfall article.