A Striking Explanation of VC Mechanics, Part 2: Liquidation Preferences
There are many articles out there explaining the mechanics of investment rounds. However, there are a range of founders who are still not confident enough about such VC and investment mechanics.
That’s why Iskender Dirik (MD at Microsoft Startup Growth Partners and Venture Partner at EQT Ventures), Christopher Mohrmann (Investment Associate at Bauer Venture Partners) and Peter Möllmann (Partner at Schnittker Möllmann Partners) decided to create a very striking, visual explanation of the most important mechanics via infographics.
The second infographic out of the series “A Striking Explanation of VC Mechanics” is about one of the most important topics of each VC Termsheets: the liquidation preference.
With the aid of clear numerical examples the first infographic illustrates a 1x non-participating liquidation preference — the most founder friendly form of a liquidation preference.
On the contrary, the second infographic shows, how a 1x participating liquidation preference functions and which strong influence she can have on the exit profits of the founders.
Authors: Iskender Dirik (MD at Microsoft Startup Growth Partners and Venture Partner bei EQT Ventures), Christopher Mohrmann (Investment Associate at Bauer Venture Partners), Peter Möllmann (Partner at Schnittker Möllmann Partners).
