Deal Terms
Stacking Preferences
When multiple preferred stock series stack their liquidation preferences, each getting paid before common shareholders.
Stacking preferences occur when a company has raised multiple rounds of preferred stock, and each series maintains its own liquidation preference that must be satisfied before proceeds flow to common stockholders. In a stacked structure, Series C gets paid first, then Series B, then Series A, then common.
In Practice
A startup with $5M Series A (1x pref), $15M Series B (1x pref), and $30M Series C (1x pref) has $50M in stacked preferences. In an exit below $50M, common shareholders get nothing.
Why It Matters
Stacking preferences create a waterfall that can leave founders and employees with little or nothing in moderate exits, even if the company sells for tens of millions.
Related Concepts
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