What is the usual Liquidation preference?
I recently heard that some investors have looted founders with 2x liquidation preference. Thus, in case of a distress acquisition, the founders and definitely the employees wont get a dime of their crores of paper money.
What is the usual liquidation preferences that you have heard in startups??
1x is table stakes for most investors. At further rounds, it goes to 1.5x. If a founder raised out of desperation, 2x is likely.
Oh so as you go from seed to series a,b,c , liquidation preference increases. Because of lower appetite for risk and larger investment size ?
To some extent yes. It also is a function of, as I mentioned, how willing a founder is to accept to those terms.
How is it looting? It's their money, they want a preference if shit goes south
