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Venture Capital Firms Attorneys - One X Liquidation Preference
When venture investors make an investment, they have a what's called a one times liquidation preference. That means if the company sells for an amount where it's not, you know, a huge number, they're not converting into their ownership percentage. And so it's sort of a safety mechanism. It almost makes the venture investment debt like in downside scenarios. So many VCs are hesitant to use a lot of structure and are hesitant to do down rounds because they don't want to upset entrepreneurs or just get themselves into complicated situationslike that.