Exit planning
Distinguish exit proceeds from share value and exercise cost
Compare gross share value, option exercise cost, modeled award proceeds, and amounts excluded from the Cap Table exit waterfall.
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Identify the amount being compared
An ownership percentage, a financing valuation, and a modeled sale payment describe different things. Exit proceeds depend on the amount available to distribute, the order of claims, class rights, and which awards participate.
The app’s waterfall applies its recorded note, SAFE, preferred-share, and award assumptions. It excludes escrow, fees, and tax. Its holder amount should therefore be read as a modeled distribution under those assumptions, not a promise of an individual’s final net cash.
Separate option value from exercise cost
Assume a participating option covers 10,000 shares at a $2 strike and, for this isolated illustration, each underlying share receives $5 before paying the strike. Gross share value is 10,000 × $5 = $50,000. Exercise cost is 10,000 × $2 = $20,000. The difference is $30,000.
This arithmetic assumes that those 10,000 options participate on those terms. It does not establish the transaction’s exercise procedure or tax treatment. At an assumed $1.50 distribution per share, the underlying amount is below the $2 strike; the simple positive-spread calculation contributes zero.
Keep other instruments separate
| Instrument | Relevant difference |
|---|---|
| Issued common shares | No outstanding option strike is attached to the share holding. Earlier purchase consideration is a separate historical cash flow. |
| Preferred shares | Preference, seniority, participation, and conversion elections can change the payment relative to ownership. |
| Unsettled RSUs | There is no exercise strike; the settlement and participation assumptions still matter. |
| Warrants | Review strike and modeled participation separately from plan awards. |
| Notes | The app models principal and accrued interest as a debt claim paid ahead of shares. |
| SAFEs | The app compares supported money-back and conversion alternatives. |
A full waterfall cannot generally assign every class the same per-share amount first and then add preferences afterward. The claims and elections determine what remains to allocate.
Compare explicit exit assumptions
Save distinct scenarios for the sale values and unvested-award assumptions you want to compare. Review the change-of-control setting and the acceleration terms on the actual awards. Record the assumptions with each result.
Compare the modeled distribution with the transaction’s actual allocation schedule, including any items outside the app’s model. The software does not execute an exercise, settle an RSU, or send payment merely because those amounts appear in an exit scenario.