If you’ve raised venture capital—or even just read about it—you’ve heard the warnings about liquidation preferences. It’s a common grouch on LinkedIn.
“The VCs get paid first!” “You could build a $100m company and walk away with nothing!” “Preferences are how investors screw founders!”
And look, I get it. Liquidation preferences are real. They’re in every term sheet. And yes, in certain scenarios, they can absolutely matter.
But here’s what almost nobody talks about: there’s also a founder preference. It’s just not called that. It’s called retention payments. And in many exits—especially the ones where liquidation preferences would theoretically bite—these retention payments can be eight…