[pdshrader]

Private venture-backed companies sell stock in the form of "preferred stock", which comes with certain rights like liquidation preferences (they get their money back first) and protective provisions (i.e. "SpaceX can't do Y without getting our permission first"). Preferred stock is "convertible" into common stock because, upon an IPO or other exit, it's generally desirable for those early investor special rights to go away, as they won't make sense anymore. Liquidation preferences would be obsolete, and the veto rights in protective provisions don't usually belong in a public company.

- Source: venture lawyer, but not your lawyer