Participating Preferred
A liquidation preference where investors first take their money back, then also share in the remaining proceeds alongside common holders, effectively getting paid twice. Non-participating preferred does not double dip.
Why it matters
Participation can take a real bite out of founder and employee proceeds in a sale, especially at modest exit values. Founders should push for non-participating preferred, which is the friendlier market standard.
For example
With participating preferred, an investor first takes back their 20 crore, then also shares in the remaining proceeds alongside common, effectively getting paid twice.
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