[pinkgodzilla]

Apologies in advance for the oversimplification. It depends on the actual contract you signed but in general it goes like this:

VC puts in 1 dollar, you sell at 1.2, VC will take the first dollar and MAY take the next 20 cents. That could mean a liquidity preference of 1.2x. If you sold at 1.4, it COULD mean VC takes 1.2 and you split the next 20cents according to your share split with the VC.

It may be easier to think of a VC as a bank that doesn't ask you to pay back a loan every month BUT if a liquidity event occurs (i.e. someone buys your company), they absolutely want all their money back first (i.e. "senior" in debt to equity holders (you)) before you get to dip your hands in.