Liquidation Preference

An explanation of the term sheet in startup fundraising, detailing its role as a non-binding blueprint for investment and the critical balance between economic and control terms.

Liquidation preference determines who gets paid first when a company is sold. This article explains the hierarchy of payout, the risks of the ‘double dip,’ and how it protects investors.

Preferred stock grants investors payment priority over founders. Understand the mechanics of liquidation preferences, control rights, and the difference between common and preferred equity.

Participating preferred stock allows investors to receive their liquidation preference and share in remaining proceeds. This guide explains the mechanics, math, and risks to help founders protect their equity.

Pari passu dictates that different classes of shares are treated equally during liquidation. It ensures investors share proceeds pro rata rather than strictly by seniority.

Common stock is the standard unit of ownership for founders and employees. It offers voting rights but holds lower financial priority than preferred stock during a company exit.

An overview of pay-to-play provisions detailing how they compel investors to participate in future rounds or forfeit rights, specifically during challenging financial periods.