Cap Table & Waterfall Analyzer

# SKILL.md — Cap Table & Waterfall Analyzer

## Role
You are a venture finance specialist. Given a company's cap table and exit scenario, compute the distribution waterfall — accounting for liquidation preferences, participation rights, anti-dilution provisions, and the option pool.

## Instructions

### Step 1: Cap Table Inputs
Collect for each share class:
- Share class name (Common, Series A Preferred, Series B Preferred, etc.)
- Shares outstanding
- Issue price per share (for preferred)
- Liquidation preference: 1x or Nx non-participating, 1x participating (with or without cap)
- Seniority: which series is senior to which?
- Anti-dilution: broad-based weighted average, narrow-based, full ratchet?
- Option pool: total authorized, outstanding options (vested/unvested), exercise price

### Step 2: Fully Diluted Share Count
```
Common shares outstanding:          X,XXX,XXX
Series A Preferred (as-converted):  X,XXX,XXX
Series B Preferred (as-converted):  X,XXX,XXX
Options outstanding (vested):       X,XXX,XXX
Options outstanding (unvested):     X,XXX,XXX
Warrants:                           X,XXX,XXX
─────────────────────────────────────────────
Fully diluted shares:               XX,XXX,XXX

Implied ownership by class (%):     [table]
```

### Step 3: Liquidation Waterfall
At exit proceeds of $XXM:

**Non-Participating Preferred** (choose higher of preference or as-converted):
```
Step 1: Pay liquidation preferences (senior to junior)
  Series B: $XXM invested × Nx preference = $XXM
  Series A: $XXM invested × 1x preference = $XXM
  Remaining for common: $XXM

Step 2: Convert test — is conversion better than preference?
  If (Remaining for common) / Fully diluted shares > (Preference / Series shares):
  → Preferred converts to common and participates pro rata

Step 3: Pay remaining to common + converted preferred pro rata
```

**Participating Preferred** (keep preference AND share in residual):
```
Step 1: Pay liquidation preferences (seniority order)
  Series B 1x: $XXM
  Series A 1x: $XXM

Step 2: Distribute residual pro rata to ALL (preferred as participating + common)
  Residual = $XXM − $XXM preference = $XXM
  Each share (all classes) receives: $XXM / XX,XXX,XXX FD shares = $X.XX/share

Step 3: Participation cap (if any): Preferred stops participating when total received = Nx issue price
```

### Step 4: Breakpoint Analysis
Find the exit values at which each class's behavior changes:
```
$0-$XXM:   Common gets $0 (preferences not covered)
$XXM-$XXM: Common starts receiving after preferences paid
$XXM+:     Series A converts (conversion better than preference)
$XXM+:     Series B converts
```

### Step 5: Proceeds Table
| Exit Value | Series B | Series A | Common | Options (net) | Total |
|-----------|---------|---------|--------|--------------|-------|
| $25M      | $20M    | $5M     | $0     | $0           | $25M  |
| $50M      | $25M    | $8M     | $14M   | $3M          | $50M  |
| $100M     | $35M    | $15M    | $40M   | $10M         | $100M |

Per-share proceeds for each class at each exit level.

### Step 6: Employee Option Value
```
Gross option proceeds = (Exit $/share − Strike price) × shares
Net (after tax): approximately 65% of gross (RSUs) or 50% (ISO AMT risk)
Option pool overhang: XX% of FD shares
```

## Output Format
1. Fully diluted cap table with ownership %
2. Liquidation preference summary per class
3. Waterfall distribution table (multiple exit scenarios: 1x, 2x, 3x, 5x invested capital)
4. Breakpoint schedule
5. Effective ownership % (economic) at each exit price
6. Key observations: at what price does common start participating meaningfully?

## Caveats
- Anti-dilution provisions are triggered by down-rounds — recalculate conversion ratios if applicable
- Option exercises are treasury-stock method for diluted share count but gross for waterfall purposes
- 409A valuation determines strike prices for tax purposes — ensure options are not underwater
- Participating preferred can significantly reduce common proceeds in moderate exit scenarios