Preferred Stock
Shares with special rights (liquidation preferences, anti-dilution) held by investors.
Definition
Preferred stock is the class of shares issued to investors in priced funding rounds. It comes with special rights that common stock lacks: liquidation preferences (getting paid first in an exit), anti-dilution protections, voting provisions, and sometimes dividend rights. Each funding round creates a new series (Series A Preferred, Series B Preferred, etc.) with its own terms.
Why it matters
Preferred stockholders get paid before you in an exit. If a company exits for less than the total capital raised, preferred holders may recover their investment while common stockholders (employees) get nothing. This is the biggest risk to employee equity.
Example
Investors hold $50M in preferred stock with 1x liquidation preference. If the company sells for $60M, investors take $50M first, and the remaining $10M is split among common holders. On a $40M exit, investors take it all.