Liquidity/redemption waterfall

A great way to plan and present your plan to redeem/pay back the investment is via a liquidity waterfall. A liquidity waterfall looks at how the liquidity of the company is used to redeem the investment over time. Here, different preferences can also be taken into account, e.g. investors from different financing rounds that have a preference for each other. Relevant points in time are often the point at which the initial investment is paid back, other relevant factors are the parameters of redemption (e.g. percentage of profits/revenues or fixed payments) and the distribution of one payment amongst different groups of investors and stakeholders (e.g. 70% used for redemption of investment, 10% used for founder compensation).

A liquidity waterfall can either be designed as a first draft with different rough phases or already with more detail and specific timings.

Example: Liquidity waterfall of WILDPLASTIC®