yes at $5m they will get nothing, but at $4m they won't be in debt. 5x is really a rip-off, but 2x (double-dip) is quiet common. Liquidation preference at its

yes at $5m they will get nothing, but at $4m they won't be in debt. 5x is really a rip-off, but 2x (double-dip) is quiet common. Liquidation preference at its core is an instrument to protect the investor. Imagine the following scenario: An Investor gives you $1m for 50% of your company. A year later it sells for $1m (because it wasn't a hit). The investor just lost $500k you made +$500k.