Liquidation Preference

A right attached to Preferred Shares which entitles the holder (usually a VC or another early stage investor) to get its investment back first on a sale of the business or other Exit Event. The balance of the sale proceeds are then allocated to the ordinary shares.  Sometimes, the Liquidation Preference means the investor first gets its money back and then its Preferred Shares convert into Ordinary Shares which then share in the balance of the Exit Proceeds. This is referred to as Double Dippingwhich is something early stage investors try to include in their Term Sheet.