preference stack

Definition

The hierarchical order in which different classes of investors get paid during an exit, determined by liquidation preferences from multiple funding rounds. It's a legal game of Jenga where common stockholders usually lose.

Example Usage

With a messy preference stack from three down rounds, the acquisition had to hit $200 million before founders saw any money—and it sold for $180 million.

Origin

Corporate finance terminology describing creditor seniority, adapted to venture capital

Fun Fact

In truly dysfunctional cap tables, the preference stack can exceed the realistic exit value, meaning an acquisition makes no one happy except lawyers.

Source: Venture capital and corporate finance terminology

Related Terms

Intermediate

triple down

When a VC aggressively increases their investment in a portfolio company across multiple rounds, betting their career on being right. Conviction investing taken to its logical extreme.

🚀 Startup / VC

Intermediate

multiple on invested capital

The total value returned to investors divided by the total amount invested, ignoring time. It's the simple, honest metric that tells you whether you made or lost money, period.

🚀 Startup / VC

Advanced

catalytic capital

Patient, flexible funding that accepts below-market returns to achieve social impact alongside financial returns, pioneered by organizations like Omidyar Network. Capitalism with a conscience, or venture capital with lowered expectations, depending on your perspective.

🚀 Startup / VC

Advanced

earnout

A deferred payment structure in an acquisition where sellers receive additional money only if the business hits specific milestones post-sale. It's how acquirers say 'we believe your projections!' while quietly not paying for them upfront.

🚀 Startup / VC

Intermediate

equity crowdfunding

Raising capital from numerous small investors through online platforms, democratizing access to startup investment and the opportunity to lose money on early-stage companies. Kickstarter, but instead of getting a T-shirt, you get illiquid securities.

🚀 Startup / VC

Beginner

Runway

The amount of time a startup has before it runs out of money and crashes, much like an actual runway but with more crying. It's measured in months and discussed in board meetings with the same energy as a doctor delivering a terminal diagnosis.

🚀 Startup / VC

Translate This Term

See “preference stack” in Corporate Speak, Gen-Z Slang, Pirate Speak, and more.

Try the Translator

Share This Term

Post on X Share on Facebook Share on LinkedIn

Discover a Term

Beginner

SJW

Social Justice Warrior...