Fundraising & Equity
Liquidation Preferences Explained
Collated by Harry Prabandham
Curated by Rubric Financial
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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
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