Pari Passu
Latin for 'on equal footing'; meaning multiple investor classes share proceeds equally in priority.
Definition
Pari passu means that multiple series of preferred stock have equal priority in the liquidation waterfall, rather than being stacked with later rounds paid first. When liquidation preferences are pari passu, Series A and Series B investors share the same priority level and split available funds proportionally if there is not enough to cover everyone's preference. The alternative is stacked preferences, where Series B gets paid before Series A.
Why it matters
Pari passu preferences are slightly better for common holders in low-exit scenarios because they prevent one series from getting paid in full while others (and common) get nothing. In practice, this term mostly matters in distressed exits.
Example
Series A invested $10M and Series B invested $20M, both with 1x preference and pari passu terms. In a $15M exit, they share proportionally: Series A gets $5M (10/30 of $15M) and Series B gets $10M (20/30 of $15M). With stacked preferences, Series B would take $15M and Series A would get nothing.