Private Equity & VCAdvanced
Liquidation Preference
An investor's right to get their money back before others when the company is sold or wound up.
Detailed explanation
A 1× non-participating preference returns the original investment first; participating preference also shares in the remainder.
Example
Investor puts ₹10 cr with 1× preference; company sells for ₹15 cr → investor takes ₹10 cr first (or converts if that pays more).
Why it matters
It decides who gets paid what in a modest exit.
Key points
- 1× non-participating is common.
- Participating is more investor-friendly.
- Matters most in low-value exits.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.