Early-stage founders: a liquidation preference of over 1x is NOT market, no matter what that potential VC investor might say.
Only 1.9% of primary seed or Series A rounds had a liq pref of over 1x so far in 2024.
A little explanation: typically, investors in a venture deal are given preferred shares (as in, preferred over common stock, which is held by employees and founders).
The preference of those shares means many things, but the most important one is that the investor will get their money back first in the event of an exit.
The standard multiplier for that investor preference is 1x. Investors make back their full initial investment, then the remaining cash is split among all parties.
But in later stages recently, that 1x preference is sometimes 1.5x. or 2x. or even 3x in very rare cases.
𝗞𝗲𝘆 𝗣𝗼𝗶𝗻𝘁𝘀
Liquidation preference over 1x is mostly a late-stage phenomenon
Liq prefs over 1x are much more common in bridge rounds than new primary ones.
Read those term sheets closely and make sure you really like your lawyer 🙏
#startups #venturecapital #founders #venturedeals
Data from the startup source - subscribe at the link in graphic below for a steady stream of startup insights!
DISCLOSURE: This communication is on behalf of eShares, Inc. dba Carta, Inc. ("Carta"). This communication is for informational purposes only, and contains general information only. Carta is not, by means of this communication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein. © 2026 Carta. All rights reserved. Reproduction prohibited.
