Liquidation Preference
A term that lets investors get their investment money back first when the company is sold — before founders and employees see any proceeds.
Quick Answer
What's the difference between participating and non-participating preference?
Non-participating preference means the investor takes either their preference amount or their pro-rata share, whichever is larger — never both. Participating preference lets them take the preference amount and then also share in what's left.
- Non-participating investors must choose one or the other
- Participating preference effectively double-dips into proceeds
- This single term can meaningfully change founder payout at exit
The Lovie Advantage
Lovie's exit modeling applies each class's actual preference terms automatically, instead of assuming a simplified standard structure.
See how this connects to Accredited Investor. For the formal definition, see Investor.gov's glossary entry on annual reports (10-K).
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