Downside protection

Liquidation preference

Preference · Liq pref

The right of preferred shareholders to be paid a set amount — normally the money they invested — before ordinary shareholders receive anything from a sale or winding up.

Participating preferred

Double dip

Preferred shares that take their liquidation preference off the top and then also share in the remaining proceeds alongside ordinary shareholders — being paid twice from the same exit.

Anti-dilution protection

Ratchet · Price protection

A provision that adjusts preferred shareholders' conversion price downward if the company later issues shares more cheaply, giving them additional shares at the expense of ordinary holders.

Pay-to-play

A provision that strips investors of their preferred rights — usually by converting their shares to ordinary — if they decline to invest their pro-rata share in a future round.

Seniority

Preference stacking · Ranking

The order in which different classes of preferred shares are paid from exit proceeds — whether later rounds rank ahead of earlier ones, or all preferred ranks equally.