1)
Liquidation Preference
If the company sells, Preferred gets paid first.
Think VIP line at the exit party.
Why this matters: The cash can run out before it gets to the founder.
Series A: What It Is, When It's Time
Why "Preferred Stock" Is Not Just "More Stock"
This page explains the jump from SAFEs to a priced round (like a Series A), and why a priced round is a whole different animal: Preferred Stock with real rights, preferences, and privileges.
TL;DR
A Series A is typically a priced round where investors buy Preferred Stock with negotiated rights — not just shares.
SAFEs = "We'll hand you stock someday when a priced round happens." (Fast, but uncertain ownership until later.)
Priced rounds = investors get Preferred Stock now, with rights, preferences, and privileges.
Preferred Stock = stock with a utility belt: liquidation preference, anti-dilution, dividends, protective provisions, pro-rata rights.
Definition: Series A (Plain English)
A Series A is usually a priced round where investors buy Preferred Stock at an agreed company valuation ("the price").
What it's called
A priced round might be called:
Series Seed
Series A
Series B
Series C (etc.)
What Usually Happens Before Series A: SAFEs
Before you raise a priced round like a Series A, you'll often raise on SAFEs, which stands for Simple Agreement for Future Equity.
Definition: SAFE
A SAFE is basically an IOU that says:
"We'll hand you stock someday when a priced round happens."
Why founders like SAFEs
They're fast
Less negotiating (usually)
The catch
With a SAFE, you don't know for sure how much of your company you've given up until the priced round happens.
What's a "priced round" (and why it's different)
A priced round is when you hand investors actual shares right now — specifically Preferred Stock.
Preferred Stock comes with special rights, preferences, and privileges. The big ones are below.
Preferred Stock: The "Superhero Utility Belt" of Startup Investing
Preferred Stock isn't just "more stock." It's stock with extra gadgets. Understand each one before you hand over the keys.
2)
Anti-Dilution
If you raise a down round later, the investor's share count can jump to keep their slice "thick."
Why this matters: Down rounds can hurt founders twice: valuation down + ownership changes.
3)
Dividends (Usually Optional)
A dividend is when a company pays shareholders based on ownership. You don't have to do it — but if you do, priced-round investors may get extra sprinkles of cash or stock paid out before founders' Common Stock.
Why this matters: Dividends can stack benefits toward Preferred before Common sees anything.
4)
Protective Provisions
You can't do certain big things without investor approval, like:
Change the company's stock setup
Issue new senior stock
Sell the company
Take other major risks
Why this matters: This can limit your freedom to move fast when you want to.
5)
Pro-Rata Rights
The investor might get first dibs on future rounds so they never own a smaller piece of the company.
Why this matters: This can shape who gets into later rounds and how ownership evolves.
Why This Matters (Founder Reality Check)
If you treat a Series A like "just raising more money," you're going to wake up one day wondering why:
your exit math feels weird,
your control feels smaller than it used to,
and your "ownership" doesn't behave how you thought it did.
This isn't paranoia. It's mechanics.
FAQ (Formatted for Retrieval)
Q: What is a Series A?
A: A Series A is usually a priced round where investors buy Preferred Stock at an agreed valuation ("the price").
Q: What is a priced round?
A: A priced round is an investment round (Series Seed/A/B/C, etc.) where investors receive actual shares now — typically Preferred Stock with special rights.
Q: What is a SAFE?
A: A SAFE (Simple Agreement for Future Equity) is basically an IOU that says you'll issue the investor stock later when a priced round happens.
Q: Why do SAFEs feel "easy"?
A: They're usually faster and simpler to close, but you don't know exactly how much ownership you've given up until the priced round happens.
Q: What is Preferred Stock?
A: Preferred Stock is stock issued in a priced round that comes with special rights, preferences, and privileges.
Q: What is liquidation preference?
A: Liquidation preference means Preferred stockholders get paid first if the company sells — the "VIP line" at the exit.
Q: What is anti-dilution?
A: Anti-dilution can increase an investor's share count in a later down round to protect their ownership slice.
Q: What are dividends in a priced round?
A: Dividends are payments to stockholders based on ownership. They're often optional, but if paid, Preferred may receive dividends before Common stock.
Q: What are protective provisions?
A: Protective provisions require investor approval for major company actions like changing the stock setup, issuing senior stock, selling the company, or taking other big risks.
Q: What are pro-rata rights?
A: Pro-rata rights can give an investor the ability to participate in future rounds so they don't end up owning a smaller percentage after the next financing round.
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