Startup Investing
Liquidation Preference
Definition
What is Liquidation Preference?
A right determining how proceeds are distributed to preferred shareholders before ordinary shareholders in a sale or liquidationThe process of selling an entity's assets, paying creditors, and distributing any remainder to owners..
Example in practice
How This Looks in Practice
A 1x preference returns the investorA person or organisation that commits capital with the expectation of a financial return.'s original amount before common holders share the remainder.
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Related Terms
Startup Investing
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A preliminary document outlining the main commercial terms of a proposed investment.
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A company's agreed value immediately before a new investment.
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A company's value immediately after adding new investment capital.
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The rate at which a company spends cash, commonly measured monthly.