Startup Investing

Liquidation Preference

Definition

What is Liquidation Preference?

A right determining how proceeds are distributed to preferred shareholders before ordinary shareholders in a sale or liquidation.

Example in practice

A 1x preference returns the investor's original amount before common holders share the remainder.

Keep learning

A preliminary document outlining the main commercial terms of a proposed investment.

A company's agreed value immediately before a new investment.

A company's value immediately after adding new investment capital.

The rate at which a company spends cash, commonly measured monthly.

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