Liquidation preference is one. Basically holders of the preferred stock get to cash out first and common stock holders get whatever’s left. In case of an exit a

Liquidation preference is one. Basically holders of the preferred stock get to cash out first and common stock holders get whatever’s left. In case of an exit at a lower than before valuation, for example, it’s not unusual for common stock to lose most (or all) of its value. The Venture Deals book is really insightful on this (and general startup financing) subject.