Description
Compare a single nonparticipating liquidation preference with common conversion and return the preferred and remaining payouts.
Equity percentages depend on the share base, issuance timing and security terms. A primary investment, option-pool expansion, vesting rule and liquidation preference change different parts of ownership or payout arithmetic; a local formula does not establish legal rights.
Compare a single nonparticipating liquidation preference with common conversion and return the preferred and remaining payouts.
When to use this tool
Use Venture Liquidation Preference One Tier when checking one explicit equity, vesting or payout convention.
How to use the tool and how it works
- Enter exitProceeds, investment, preferenceMultiple, ownershipFraction. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read preferredPayment, commonPayment, converted. Inspect converted before interpreting the associated values.
Require nonnegative exitProceeds, investment and preferenceMultiple and ownershipFraction in [0,1]. Compare min(exitProceeds,investment*preferenceMultiple) with exitProceeds*ownershipFraction. preferredPayment is their maximum, commonPayment is the remainder, and converted is true only when conversion pays strictly more.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| exitProceeds | Exit Proceeds | Required. Finite number; minimum 0. |
| investment | Investment | Required. Finite number; minimum 0. |
| preferenceMultiple | Preference Multiple | Required. Finite number; minimum 0. |
| ownershipFraction | Ownership Fraction | Required. Finite number; minimum 0; maximum 1. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| preferredPayment | Preferred Payment | Required. Finite number. |
| commonPayment | Common Payment | Required. Finite number. |
| converted | True only if the ownership-based payment strictly exceeds the capped preference payment. | Required. Boolean. |
{
"input": {
"exitProceeds": 10000000,
"investment": 2000000,
"preferenceMultiple": 1,
"ownershipFraction": 0.3
},
"output": {
"preferredPayment": 3000000,
"commonPayment": 7000000,
"converted": true
}
}Limitations and assumptions
- This models one nonparticipating preference tier with an optional conversion comparison. Ties do not set converted; multiple seniorities, participation and contractual details are omitted.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Reconcile the complete capitalization table and relevant agreements before using a local share or payout term in a financing decision.
References
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