Free tool · Equity waterfall
Equity waterfall calculator.
Set the equity, the preferred return, and the promote tiers, then enter what the deal returns at exit — see exactly how the profit splits between LP and GP. No login.
The deal
Cash available to split (sale proceeds + cumulative distributions).
The waterfall
LP/GP split above pref (GP gets the rest).
LP/GP split above the second hurdle.
GP catch-up
100% to GP after pref until it reaches its 30% tier-1 carry.
To LP
$9,553,992
1.91× · 13.8% IRR
To GP
$1,446,008
2.89× · $946,008 promote
LP receives
GP receives
How the waterfall splits profit
An equity waterfall is the payment order written into the operating agreement: who gets each dollar of distributions, and in what sequence. Capital comes back first — LP and GP alike recover what they invested before anyone earns profit. Then the LP preferred return accrues, the hurdle the LP must clear before the sponsor shares in the upside. Only above the pref do the promote tiers kick in, and each IRR hurdle the deal clears shifts the split further toward the GP.
The promote is the sponsor's economics. A GP holding 10% of the equity but taking 30% of profit above an 8% pref is being paid for sourcing, financing, and executing the deal — not for its capital. That leverage on profit is why LPs scrutinize hurdles and splits harder than any other term in the deal, and why a two-tier structure (say 70/30 above the pref, 60/40 above a 14% IRR) concentrates the GP's payoff in outcomes where LPs have already done well.
This tool models a European (deal-level) waterfall: all equity in at close, all proceeds split once at exit, so the IRR hurdles reduce to exact multiple thresholds. American-style waterfalls run the same tiers on each distribution as it happens, which pays the GP sooner and is why they usually come with a clawback. Real deals also distribute monthly with interim cash flow and pref accrual — the in-app engine models that and reconciles every tier to the levered cash flow.
What order does money flow in an equity waterfall?
Return of capital first — every dollar invested comes back before anyone earns profit. Then the LP preferred return, the compounding hurdle LPs must receive before the sponsor participates in profit. Then, if the deal has one, a GP catch-up. Everything above that splits at the tier percentages, shifting further toward the GP at each IRR hurdle it clears.
What is the GP promote?
The share of profit the GP earns above its pro-rata share of invested capital — the sponsor’s compensation for finding, financing, and executing the deal. A GP that put in 10% of the equity but takes 30% of profit above the pref is earning a 20-point promote on that tier.
What is a GP catch-up?
A tier between the pref and the ordinary splits in which 100% of distributions go to the GP until it has received its full carry percentage of the profit paid so far. With a full catch-up, the pref sets the floor on LP timing but not the final split; without one, the GP’s promote applies only to profit above the pref, so the LP keeps more of the total.
Can a waterfall have more than one class of LP?
Yes. Larger deals often layer preferred equity or multiple LP classes, each with its own return hurdle and place in line — senior positions are paid in full before junior ones participate. This calculator models a single LP class against the GP; stacking classes composes the same mechanics in order of seniority.
Simplified model: all equity in at close, all proceeds distributed once at exit (a “European” waterfall), so the IRR hurdles reduce to exact multiple thresholds. New to the structure? Read the equity waterfall, explained. Not investment advice.
Want the waterfall on a real deal?
In Nivora the full waterfall runs monthly off your actual rent roll and T-12, reconciled to the penny — see it live on a sample deal.