so your clarifying language is right, just not necessary in the context.

@Nitin Yes.

@Venkat
When entrepreneurs want a ton of cash to really go for it, the terms are fine. I just think they are overused terribly at the early stage with startup management who don’t really understand what they are buying into.

@Chris Yeh
The Preferred need protection but they don’t need control as a starting point of the negotiation. A 1X liquidity preference isn’t at all necessary. There are a hundred ways to solve that problem. Unlike @Saul Lieberman I think a co-sale right is much fairer to all parties than a liq pref.

The mechanism that I like best is a co-sale right plus an _expiring_ liq pref tied to a drag along, i.e. below a certain multiple of cash-on-cash return, the Preferred has a bunch of rights and a bottom line payout. Above that multiple, everyone gets paid solely proportional to share ownership and the Common rules the roost change of control decisions.

The reason to have a Preferred is to give out Common Stock options to new employees at a lower price than the investors paid.