Preferred Stock (Venture)

The share class a venture investor buys in a priced round. It carries the same economic upside as common stock through the right to convert, plus rights the common does not have: a liquidation preference, anti-dilution protection, protective provisions over major decisions, and usually a board seat. Each round is a separate series (Seed, A, B) with its own terms.

How a startup is financed · 14 of 26Next: Liquidation Preference

Practise it

The same cheque written six ways: common, non-participating preferred, participating preferred with and without a cap, a SAFE still unconverted and a convertible note. Slide the exit value and watch who gets paid, in what order, and where each instrument converts.

Open Exit Waterfall Lab, free, 12 min

Where Preferred Stock (Venture) comes up

Liquidation Preferences and Preferred Stock, ExplainedOwnership is a fraction. A preference is a choice. Every instrument a venture investor holds is a different rule for making it, and the exit value decides which way it goes.Read the guide — 13 min Private Equity vs Venture Capital: What Each One Is Actually BuyingBoth buy private companies. Almost nothing else about the two jobs is the same, and the reason is what each one is underwriting.Read the guide — 10 min Cap Tables, Dilution and the Option PoolEvery term that sounds like a price is an instruction about this table. Learn to redraw it by hand and most of the technical questions in a venture interview answer themselves.Read the guide — 13 min

Keep reading

The venture capital hub

Related Venture Capital terms

KISS (Keep It Simple Security)Non-Participating Preferred Most Favoured Nation (MFN) Clause Participating Preferred Conversion Discount Seniority (Liquidation Stack)

How a startup is financed: keep going

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