One Thing All the Billion-Dollar Unicorns Have in Common

Silicon Valley law firm Fenwick and West recently analysed 37 investments in privately held companies valued at $1 billion+ during the 12 months to March 2015. They found that “the one thing common to every one of these funding deals… is that in every case (all 37 of them!) investors demanded a “liquidation preference.” A liquidation preference the is right to get paid first ahead of other parties — such as founders or management — in the event the company is sold. If the company sells for a price that is lower than the valuation the investor paid, that investor is the first one in line to receive the proceeds of the sale until they’re made whole. And if the company sells for a higher price, they’re first in line to reap a share of the profit.” (VIEW LINK)


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