Typically investments in private technology companies include a provision called "liquidation preference" where investors get their money out before other share

Typically investments in private technology companies include a provision called "liquidation preference" where investors get their money out before other shareholders (managers and employees) get paid on an exit. A common term is "1x liquidation preference" which is the example you give -- if I put in $1M, I get $1M out before anyone else gets paid, even if the sale valuation is less than the valuation at which I invested. Sometimes you see 2x or 3x liquidation preference, in which investors get that level of return before other shareholders get paid. This is considered "less common-friendly" and is a worse term if you are a founder or employee. There are also other variations on this general idea that you see particularly when valuations get high. So, in a case like the purported Snapchat round, a new investor would actually look at the investment as a combination of financial instruments -- think of it as a call option (participate in appreciation above the entry price) coupled with a put option (get your money out if the company sells at least for more than the amount of invested capital). The more money involved, the more complex this gets and the harder it is to evaluate the true pros and cons of the investment based on public reporting.