Preferred Stock
Also called Preferred Shares
The class of shares investors receive, carrying extra rights over common stock: liquidation preference, anti-dilution, and often board or veto rights. Converts to common in an IPO.
Why it matters
Almost all VC money buys preferred, so its terms shape control and payouts. The gap between what preferred and common are worth is exactly where founders need to read the fine print.
For example
The Series A investors receive preferred stock carrying a 1x liquidation preference and a board seat, rights the founders' common stock does not have.
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Related terms
Also in Starting Up
See how founders actually handle this on Raising your first round, part of the Starting Up hub.
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