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• •Downside protection: in a low-price sale investors don't lose their capital
• •1x non-participating is market standard and easy for founders to accept
• •Makes it easier to close the round because investors feel protected

• •Multiples above 1x (2x, 3x) can wipe out the founders' payout in a mid-sized exit
• •Every new round adds its own preference on top: the 'stack' grows and eats into future exits
• •Combined with participation, it can double-dip against the founders

No cash impact day to day. It only comes into play if the company is sold, wound up, or liquidated.

Example: investor puts in €2M with 2x preference. In a €5M sale, they take €4M first and only €1M is left for founders and employees. With 1x, they'd take €2M and leave €3M to share.

• •Non-participating is founder-friendly: investors choose either their preference OR their pro-rata share
• •Capped participation limits total investor return and keeps exit proceeds predictable

• •Full participation lets investors 'double-dip' — preference back, plus a share of what is left
• •Even capped participation can shift millions of euros away from founders in mid-sized exits

No cash impact until a sale; it mainly changes how future exit proceeds are modelled in the term sheet.

In a €20M exit with a 2x preference, full participation can leave founders with several million euros less than a non-participating structure.

• •Pari passu keeps things simple and fair between early and later investors
• •Stacked seniority is often the only way to attract a large late-stage lead
• •Clarifies the exit waterfall so nobody argues at closing

• •Stacking systematically favours the latest investors over your earliest backers
• •In a modest exit, the stack can consume all the proceeds before common stock sees anything
• •Becomes a heated negotiation from Series B onwards

Rarely negotiated at Seed. Becomes a real issue from Series B when multiple preferences co-exist.

Defines the exit 'waterfall'. Example: three rounds of €5M each, all with 1x preference. Pari passu means everyone gets paid pro-rata out of the first €15M. Stacked means Series B takes €5M first, then Series A, then Seed — earlier investors are last in line.

• •Standard mechanism, almost never contested
• •Lets investors pick the more profitable path at exit (preference vs. pro-rata upside)
• •Guarantees a clean single-class cap table for IPO

• •Automatic conversion thresholds (minimum IPO price/size) can be pushed high by investors
• •A high threshold can block an otherwise attractive IPO
• •Adds a layer of complexity to every future round's modelling

No day-to-day effect on operations.

Removes preferred rights at IPO so the public gets a single, simple class of shares.

• •Gives investors a liquidity path even without an exit
• •Rarely actually triggered — it's more of a psychological safety net
• •Can push the company towards a real exit strategy

• •Can force the company into a distressed sale to raise cash
• •Signals that the investor doesn't fully trust the long-term plan
• •The buyback cost hits the balance sheet exactly when the company is likely already struggling

No impact during the years before the window opens.

Creates a potential cash overhang 5-7 years post-investment. Example: €3M raised with 1x redemption after 5 years means, in year 6, the company may have to find €3M+ dividends to buy those shares back.