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It's not just about the negotiation power. It's about the total price for the whole deal. A VC might be willing to negotiate away a liquidation preference, bu

It's not just about the negotiation power. It's about the total price for the whole deal. A VC might be willing to negotiate away a liquidation preference, but he would be very worried that he was buying a lemon. The total price would go down. Similarly, maybe you start negotiations without a liquidation preference. Putting it on the table in exchange for a higher valuation isn't a bad idea. A liquidation preference helps prove that you're not selling a lemon. It says "look, if this thing goes sour, you get your money back first." That's worth a lot to a VC because it signals that you are serious. The money itself isn't nearly as important as the fact that the company founder is putting his money where his mouth is by saying, in effect, "I won't get paid unless this is as big of a success as I think it is."

dennykmiu 18y ago
I can only talk about my own experience, hoping that it can be useful to someone and I try hard not to generalize. And my own experience with negotiation (with VC's) is that it is not one-to-one but one-to-many. My best experience was when I had three termsheets on the table and I went to one VC and said, "I like the price on A, I like the terms on B, but I like you". The end result is that I get to work with the VC that I like and I get the pricing and terms that I can live with. So by negotiation power, I don't mean negotiation skills. The only true power you have as an entrepreneur is when you don't need their money. But if you need their money, then you have no power and you are "meat on the chopping board". In that case, liquidation preference is the least of your problems.