Funding and ownership
Liquidation preference
An investor's right to get their money back, or a multiple of it, before ordinary shareholders receive anything when the company is sold or wound up. "1x non-participating" (get your money back or share in the proceeds, whichever is more) is the most founder-friendly common version.
A plain-English explanation, not financial or tax advice. Rules and rates change, so check your own situation. For free, impartial guidance, try MoneyHelper. Disclaimer.
You'll hear it as
They've got a 2x liquidation preference, so they take the first twenty million of any sale.
Why it matters to you.
It's the clause that decides what your equity is actually worth in a modest sale. A headline sale price tells you little until you know the preferences ahead of you.
Related terms.
Videos.
No video mentions Liquidation preference by name yet. These are on the same topic, Business & startups.