[SilconValleyVC]

There are two main types of liquidation preferences. First Participating vs. Non-Participating. Best for us (VCs) (worse for founders): Participating Preferred (i.e. VCs get our liquidation preferences PLUS we "double dip" and share pro-rate in anything above). Non-participating means basically that we take our pick: either the Liquidation Preference (usually amount VCs invested, sometimes though 2x or 3x etc.) or share pro-rate as if we had converted to common. So we take our pick of the higher amount

Participating Preferred: We get best of both worlds.

[rdl]

Of course, for a VC investing in an early round, it's actually often more in the VC's long-term interests to take entrepreneur friendly terms, since later rounds are never less favorable to entrepreneurs and previous investors than previous rounds.

So, if you go in at 2-3x PP in the A, you're basically dooming yourself to even higher multiples in future financings. I guess you could pro-rata, but still, the A tends to be significant.