Preferred shares get paid first. Most investors get preferred shares that give them a “liquidation preference” which means they can get the money they put into

Preferred shares get paid first. Most investors get preferred shares that give them a “liquidation preference” which means they can get the money they put into the company back out (or some multiple of that money) off the top of the purchase price. If the purchase price of the company isn’t greater than the money VCs put into the company, the common shares are typically worthless. Sometimes preferred shareholders have to choose “exercise this preference” and then the shares go poof (“non-participating preferred”) and sometimes preferred shareholders can get this preference AND then also become common shareholders alongside everyone else and get to share what’s left after the preference is paid (“participating preferred”)