Mohit Aggarwal Exit Waterfall Skill
A cap table is a promise about percentages; an exit waterfall is what actually happens to the money. The difference — liquidation preferences, participation, option strikes — routinely stuns founders at the worst possible moment. This skill computes the waterfall across exit prices and, more importantly, translates it: the price below which your shares are worth nothing, and the price where everyone finally converts.
What This Skill Produces
- The payout table — every stakeholder's dollars at each exit price, with conversion decisions shown
- The cliff points — where preferences stop dominating, where options come into the money
- The plain-English reading — "you need a $X exit for your common to mean anything" stated as a sentence
Required Inputs
Ask for these if not provided:
- Share classes — for each: name, share count, type (common / preferred / options); for preferred: amount invested, preference multiple, participating or not; for options: strike
- Exit prices to test — or default to a spread around the last round's valuation (label it as a default)
Programmatic Helper
The math ships as a deterministic script — run it rather than arithmetic-by-hand:
python3 scripts/exit_waterfall.py cap.json
python3 scripts/exit_waterfall.py cap.json --exit 50000000 --json
Input shape and worked example are in the script docstring. It brute-forces the conversion equilibrium (each non-participating preferred converts only when as-converted beats its preference) and applies the treasury method to options. Stated simplifications: preferences are pari passu (no seniority stacking) and participation is uncapped — flag both when the real cap table differs, and say the numbers shift accordingly.
Formula (readable form)
- Non-participating preferred takes max(preference, as-converted value) — preference = invested × multiple
- Participating preferred takes preference + pro-rata of the remainder (why "participating" is the term sheet word worth fighting)
- Options exercise only when per-share common value > strike; strike proceeds join the pool
- Remainder splits pro-rata among common + converted + participating shares
Output Format
Exit Waterfall: [Company]
Payout Table
[The script's table: exit price × stakeholder, with the converts column]
What This Means
- Below $[X]: preferences consume everything — common gets zero
- At $[Y]: [class] converts; the structure starts behaving like percentages
- The sentence: "Your [n]% is worth [n]% only above $[Z]; below $[W] it is worth nothing."
Assumptions & Limitations
[Pari passu, uncapped participation, valuation of the classes as supplied — every deviation from the real documents named.]
Educational model, not financial advice — verify with a licensed professional before acting on it.
Quality Checks
- Conversion decisions are computed, not asserted — the table shows who converts at each price
- The zero-for-common threshold is stated explicitly as a price
- Every simplification the model makes vs the real documents is named
- Payouts at each price sum to the exit value (plus/minus rounding)
- The disclaimer line appears in the artifact
Anti-Patterns
- Do not present ownership percentages as payout percentages — the gap between them is this skill's entire reason to exist
- Do not model participation caps or seniority stacking silently — the script doesn't; say so
- Do not average across exit prices — the cliff structure IS the information
- Do not run the numbers without the plain-English sentence — founders remember sentences, not tables