Preferred Stock
Definition
Preferred stock is the share class investors receive in priced rounds, carrying rights common stock lacks: liquidation preference, anti-dilution, and often board or veto rights.
How it comes up in fundraising
Each financing typically creates a new series of preferred (Series A Preferred, B, and so on) with negotiated protections.
Frequently asked questions
Why do investors get preferred stock?
They pay far more per share than founders did; the protections compensate for that price by insuring downside scenarios.
When does preferred convert to common?
Typically at IPO or when holders elect conversion in an exit where their ownership percentage beats their preference.
Related terms
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