Liquidation preferences on one napkin
Who gets paid first when the company sells, in three lines.
In short. A 1x non-participating preference is normal. Anything above it costs you at a modest exit. Run the numbers at three exit sizes.
A preference decides who gets their money back first if the company sells. At a big exit it hardly matters. At a modest one it decides everything.
| Investor preference | €2,000,000 |
| Left for everyone | €10,000,000 |
| Founders’ 70% | €7,000,000 |
Now try 2x participating with the same numbers. Then decide whether the higher valuation was worth it.
E. Brandt
Weiter.
Go deeper · The numbers
Cap table: three rounds, simulated
Change one assumption and watch the founders’ share move.
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The pre-seed round I regret
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