# Liquidation Preference

*Startups & Venture Capital — Finicade finance glossary*

A liquidation preference guarantees investors get their money back — usually 1× — before common shareholders receive anything in an exit. It's the single most important economic term after price. In a disappointing sale the preference stack can consume the entire proceeds, which is how founders and employees end up with nothing from a company that sold for a headline number in the hundreds of millions.

**Also known as:** liq pref, 1x preference, preference stack

**Related terms:** [Participating Preferred](https://finicade.com/glossary/participating-preferred), [Preferred Stock](https://finicade.com/glossary/preferred-stock), [Exit](https://finicade.com/glossary/exit), [Cap Table](https://finicade.com/glossary/cap-table), [Down Round](https://finicade.com/glossary/down-round)

Source: https://finicade.com/glossary/liquidation-preference