If you work in the tech industry, youve undoubtedly heard the term liquidation preference at some point. You may have experienced a chill as the words fell upon your ears, too. Theres a non-medical reason for this: liquidation preferences are created to ensure that investors get paid before anyone at a startup when the company either sells or else goes out of business. In short, theyre good for investors and less good for founders, employees, or even earlier investors.
WTF?
Lets walk through the basics.
Broadly, a liquidation preference determines who gets what when a company is liquidated. This can mean when a company is merged or when its sold or when theres a change of control of the company or when theres a wind-down.
In al…
Read the full article at: https://techcrunch.com/2016/12/25/wtf-is-a-liquidation-preference/