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Glossary: Liquidation Preference

What is Liquidation Preference?

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A term in a venture capital deal that allows investors to get their money back before others receive proceeds from a sale of the company. Liquidity preference typically only comes into play when a company is sold for less than the post-money valuation that the investor paid. Example: Our investors only owned 10% of the company but they took home 50% of the sale price because of their liquidation preference. 

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