Liquidation preference
MarketsDefinition
In a startup capital structure, the right of preferred stockholders (usually VC investors) to receive their original investment back BEFORE common stockholders (usually founders/employees) in a liquidation or acquisition.
"1x non-participating" preference is most common: investors get their money back, then everyone shares the remaining proceeds. "Participating" preference is more aggressive: investors get money back AND share remaining proceeds.
"1x non-participating" preference is most common: investors get their money back, then everyone shares the remaining proceeds. "Participating" preference is more aggressive: investors get money back AND share remaining proceeds.