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Let's say the company gets acquired for $20M. Is it still possible for the other 90% to make $0? Or is the preference amount exactly equal to the invested amoun

by adtac 8y ago

Let's say the company gets acquired for $20M. Is it still possible for the other 90% to make $0? Or is the preference amount exactly equal to the invested amount?

pge 8y ago
Typically preference = invested capital, but there are exceptions where it could be more (usually only if investors were investing in a distressed situation)
TuringNYC 8y ago
Yes, it is possible to have 1.25 or 1.5x first money out liquidity preference. I'm not sure how common that is though, but I've seem it multiple times. Also note, you can end up with negative returns since you may have paid taxes on the options. SEE: https://www.nytimes.com/2015/12/27/technology/when-a-unicorn-start-up-stumbles-its-employees-get-hurt.html https://www.nytimes.com/2015/12/27/technology/when-a-unicorn...