You rolled 20% of your deal—but at the next exit it’s worth zero. Here’s why.
Founders often assume 20% rollover equity means 20% of the next sale.
Wrong. They overlook preference stacks, liquidation waterfalls, and how private equity firms actually distribute proceeds.
Your equity usually sits behind senior debt, and sometimes even preferred equity that outranks your class. Unless the next exit clears those hurdles, your rollover never participates.
You thought you had upside, but in reality you may have been underwater from day one.
I’ve seen founders blindsided by this because no one explained the math—or the legal priorities.
So before you roll too much equity, ask the hard questions:
– Where do I sit in the waterfall?
– Who gets paid before me?
– What’s the real upside cap?
Monetizing rollover equity isn’t just about deal mechanics. It’s about applying real financial and legal strategy.
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