[tomp]

Genuine question:

For liquidation preference >= 1x, why even call it equity instead of debt?

The point of equity is that you own a part of it, and you get a proportional share. The point of debt is that the money owed to you is preferred over other owners (i.e. equity owners). It seems to me that liquidation preferences allow investors to take the best of both worlds.

[lpolovets]

It's "mostly" equity. If a company doesn't exit for anything it's not on the hook for the VC $, there are no monthly interest payments, etc. OTOH if there's a great exit that clears the preference stack, then the liq preference is irrelevant. A bit more debt-like in the middle.

[matthewmcg]

The liquidation (or dividend) preference is the differentiating feature of preferred stock. In corporate finance, preferred stock is, for the reasons you give, treated as a hybrid of equity and debt.