You are incorrect. Liquidation preference matters for ANY liquidation valuation less than the fundraising valuation. Let's say a VC invests $500M into Uber at

You are incorrect. Liquidation preference matters for ANY liquidation valuation less than the fundraising valuation. Let's say a VC invests $500M into Uber at a $50B valuation (1% equity). If Uber gets acquired for sub-$50B, then the VC gets their $500M back despite their ownership percentage. As an example, if Uber were acquired for $25B, then the VC would get their $500M back rather than the equity value of their shares (1% of $25B => $250M). And if they had 2x liquidation preference, they'd earn $1B on a $25B liquidation. This downside protection (sale of company for less than valuation at fundraise) is a key term on all priced rounds for this very reason. That's why these terms matter so much.