Startups Equity Waterfall Template

When navigating the complex world of fundraising, startups face numerous challenges, from pitching to investors to deciding how much equity to allocate. Among these, understanding and planning for the impact of future investment rounds on ownership structure is crucial. This is where an equity waterfall analysis comes into play—a powerful tool for forecasting and managing equity distribution throughout your fundraising journey.

What is an Equity Waterfall Analysis?

An equity waterfall analysis is a financial tool used to project how a startup’s equity will be distributed among stakeholders after various rounds of investment. It helps founders and investors visualize how ownership percentages change over time as new capital is raised, ensuring transparency and informed decision-making.

Why is an Equity Waterfall Analysis Essential for Startups?

Plan for dilution:
Founders can forecast and plan future investment rounds to better understand their future dilution.
Attract investors with transparency:
Investors want to see a clear breakdown of ownership post-investment. A well-prepared equity waterfall shows you understand your cap table and can present a realistic view of their stake.
Prepare for the long term:
Equity waterfall analysis helps startups plan for multiple rounds of funding, ensuring that future rounds won’t compromise the company’s ownership structure or key stakeholders’ interests.