Liquidation preferences. Large investors can negotiate a liquidation preference with their investment. This means they will receive some multiple (1x, 2x, ...)

Liquidation preferences. Large investors can negotiate a liquidation preference with their investment. This means they will receive some multiple (1x, 2x, ...) of their investment from the liquidation proceeds. These investors can also be "participating members" which means after receiving their liquidation preference they can still receive their pro rata share of the liquidation proceeds based on their equity stake. So if a company was liquidated for an amount at or below the sum of the liquidation preferences there's nothing left for the shareholders to divvy up.