Liquidation Preference

Liquidation Preference

The amount preferred shareholders get back before common holders at an acquisition or wind-down.

What Liquidation Preference means

In an exit, preferred shareholders (the investors) get paid before common shareholders (founders and employees). '1x non-participating' means they get their money back, then the remainder is split by ownership. '1x participating' means they get their money back and then also share in the remainder — much worse for founders.

Multiple preferences (2x, 3x) exist but are rare in healthy markets. In a modest exit, a heavy preference stack can leave common holders with nothing.

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• Liquidation Preference
• Liquidation Preference
• Liquidation Preference Stack
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• Grant Funding
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