Headline price is one term of many
Liquidation preference determines who gets paid first at exit. A 1× non-participating preference is market standard. A 2× participating preference on a modestly higher valuation can leave founders with dramatically less at realistic exits.
Anti-dilution protects investors if you raise lower later. Broad-based weighted average is standard; full ratchet is punitive.
Pay-to-play provisions require investors to keep supporting the company to retain their protections — generally founder-friendly.
Always run the waterfall
Model exits at 1×, 2×, and 5× the current valuation and see what each party receives. Structure is invisible until it is expensive.
Key takeaways
- A high price with heavy structure can be worse than a lower clean price
- Model exit waterfalls before signing