Liquidation preference is the contractual right of preferred shareholders (typically VCs) to receive their investment back — plus a multiple — before common shareholders (typically founders, employees) receive anything in a liquidation event (sale, dissolution). 1× non-participating is founder-friendly: investor gets back their investment or pro-rata share of proceeds, whichever is higher. 1× participating: investor gets investment back THEN shares pro-rata in remaining proceeds with common. 2-3× participating is aggressive: investors get 2-3× investment back THEN share remainder. Liquidation preferences stack in down rounds, leaving founders with negligible exit proceeds even on 'successful' sales.
Article
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Break-Even Point
Break-even point is the level of sales where total revenue equals total costs — zero profit, zero loss.…
Budget vs Actual
Budget vs Actual (BvA) variance analysis compares budgeted financial performance to actual results, identifying gaps and their drivers.…
Burn Multiple
Burn Multiple is a venture capital metric: Net Cash Burn / Net New ARR — measuring how efficiently…
Burn Rate
Burn rate is the rate at which a startup spends cash beyond what it generates from operations, expressed…
CAC
Customer Acquisition Cost (CAC) is total sales and marketing spend divided by new customers acquired in a period.…
Liquidation Preference
August 22, 2026 · Aditya Gupta
Corporate Finance
Related terms
ARR
Annual Recurring Revenue (ARR) is the annualized value of subscription contracts — the standard metric for SaaS businesses.…
Break-Even Point
Break-even point is the level of sales where total revenue equals total costs — zero profit, zero loss.…
Budget vs Actual
Budget vs Actual (BvA) variance analysis compares budgeted financial performance to actual results, identifying gaps and their drivers.…
Burn Multiple
Burn Multiple is a venture capital metric: Net Cash Burn / Net New ARR — measuring how efficiently…
Burn Rate
Burn rate is the rate at which a startup spends cash beyond what it generates from operations, expressed…
CAC
Customer Acquisition Cost (CAC) is total sales and marketing spend divided by new customers acquired in a period.…
