Business Pitch Dictionary by pitch.dog
Term-sheet economics · Core

Liquidation waterfall

Also called: exit waterfall

ELI5

The order and formula for splitting sale proceeds.

Used in conversation

“Model the liquidation waterfall at several exit values.”

Definition

The calculation and order by which transaction proceeds are distributed among security holders.

Here “Liquidation waterfall” means: The calculation and order by which transaction proceeds are distributed among security holders.

Pitch context

You will see “Liquidation waterfall” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches term-sheet economics.

Why it matters: In term-sheet economics, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

Sources & evidence · 5

Direct term-level sources and supporting source families.