Liquidation Preferences Explained

What Liquidation Preferences Are

• A liquidation preference determines the order and amount investors receive before common shareholders (founders, employees) get anything in an exit event
• Exit events that trigger preferences include acquisitions, mergers, asset sales, and sometimes IPOs — essentially any event where shareholders receive proceeds
• The preference 'stack' is paid in reverse order of investment: Series C gets paid first, then Series B, then Series A, then common
• Without understanding your preference stack, the headline acquisition price tells you nothing about what founders and employees actually receive