Waterfall Analysis – Everything you need to know about Waterfall chart

Waterfall Financial Modeling is used to calculate the breakdown of the total value of the company among the various shareholders upon exit of the company.

A general ‘waterfall’ is an analytical tool that visually presents the sequential breakdown of a starting value (ex: revenue) to a final result (ex: profit) by displaying intermediate values and ‘leakage’ points. This can be used by companies to track data on each step.

Waterfall Financial Modeling is used to calculate the breakdown of the total value of the company among the various shareholders upon exit of the company. This is useful for both company founders and investors as their share of the company’s value may differ from the cap table percentage of their shares, depending on various factors.

What is a Waterfall chart?

A waterfall chart is also known by many other names: waterfall graph, bridge graph, bridge chart, cascade chart, flying bricks chart and net profit waterfall chart. Regardless of the name, this versatile chart is a great way to provide a quick visual into the breakdown of data.

Waterfall Analysis

Within a waterfall chart, the initial and final values are shown as columns with the individual adjustments depicted as floating steps. The waterfall chart as a financial analysis would typically show the values as per each preference round, and how the exit value is split between each round of investors.

The key feature of a waterfall chart is that is shows each step in the final result and demonstrates how you got there. And the beauty of a waterfall chart is its simplicity of construction, even in analyzing complex information — which means it will likely enjoy heavy use into the future.

Who all uses Waterfall Analysis?

Waterfall analysis as a financial model is used mainly by the shareholders of the company (founders, investors, employees), but can also be used by those making important financial decisions of the company. The waterfall analysis would show the shareholder the amount each receives respectively upon the exit or sale of the company.

The main stakeholders using this would include:

  • Founders
  • VC firms
  • Angel investors
  • Bank institutions
  • Employees
  • Directors and Company Managers
  • Lawyers and Accountants

Advantages of using Waterfall Analysis

Waterfall analysis is a method that presents your data in an impactful manner, which is why they have become increasingly popular in recent years. These complex calculations take into consideration a multitude of factors to determine the final results of the exit value for each shareholder. This information is presented by each round to show how the final value is broken down.

Eqvista Waterfall Analysis
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Here are some examples of advantages of Waterfall Analysis

  • Customize the exit scenario by date and possible transaction fees
  • View the amount of the Preference Liquidation for investors
  • Show the amount of the general round for common shareholders
  • Determine the conversion of options & warrants from the final share price
  • Review the final results for each share class
  • Calculate the value with dividend interest from preference shares
  • Calculate the value with interest from convertible note

Creating a Waterfall chart using Excel

In the beginning, most companies calculated their exit rounds through waterfall analysis on excel. And while this was good enough for companies with only a few shareholders, it became increasingly difficult to calculate accurately when the company had investors and employees becoming shareholders as well.
An excel format also is challenging when the number of shareholders change frequently, vesting occurs within the company, or new investors are introduced. This information is also difficult to share with others in real time, making several waterfall analysis scenarios over a period of time also more difficult to trace on excel.

Here is an example of calculating a waterfall analysis using excel:

Waterfall Analysis

As excel is still the preferred method as used by many in the business field, this may be the easiest way to calculate and visualize the data for the company. However once the number of shareholders increase, and the complexity of the preference shareholder increases with factors such as liquidation multiples and conversion rates, its better to use an equity management tool to accurately calculate this.

This is why at Eqvista, we have created our own waterfall analysis tool to help companies out.

Creating a Waterfall Analysis using Eqvista

Our waterfall analysis at Eqvista incorporates both a user friendly interface and various options when calculation your exit values. These factors are taken into consideration when undergoing the calculations for each share class.

Waterfall Analysis

These inputs include:

  • Exit Value
  • Exit Date
  • Uncovered Debt
  • Transaction fees
  • Inclusion of Cash Dividends
  • Inclusion of Converted Liabilities

We have also incorporated our waterfall chart as shown below:

Waterfall Analysis

The advantage of using the Eqvista waterfall analysis is all the data displayed is instantly reactive, showing the effect each time you change values. This way is the most efficient way to save you time when viewing your exit rounds.

Another important feature of our waterfall analysis is the breakdown of the investor preference share rounds for each share class. Rather than only show the total sum, we display the value by each round, showing how the breakdown is calculated in determining the final value.

These results are also compared with the original Cap Table shareholdings, showing how each share class has been affected by the exit value.

Waterfall Analysis

These features allow our users to accurately calculate their exit rounds while also displaying enough information for them to understand the results. We also have a waterfall chart for them to view the preference round liquidation. This transparent method of waterfall analysis is the reason why many choose Eqvista for their financial modeling.


With everything covered about waterfall charts and waterfall analysis as a financial tool, it’s obvious why this form of financial analysis will become an increasingly popular tool in the future. After your company has secured funds and increased its shareholder pool, consider using this waterfall analysis for your company too!

With our advanced Waterfall analysis on the Eqvista App, you can easily calculate the financial rounds on exit of your company. We show the breakdown all the information for you to review, and help you manage future investments in your company. Give it a try, or contact us now for more details!

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