Fundraising
Liquidation Preference
Quick definition
The multiple of their investment preferred holders receive before common in an exit.
Liquidation preference is the amount investors get back before common shareholders in a sale or liquidation. Standard is 1x non-participating. 'Participating' preferences or multiples above 1x are more investor-friendly and compress common returns.
Related fundraising terms
SAFE (Simple Agreement for Future Equity)
Convertible instrument commonly used for early-stage rounds.
Convertible Note
Debt that converts to equity at the next priced round.
409A Valuation
Independent valuation of common stock used to set option strike prices.
Cap Table
A record of all ownership interests in your company.
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