Venture capitalists are known to prefer preferred stock. Why?
It gives them preference in the event of a company’s liquidation or sale, which enables venture capitalists to get back their investment before other investors receive any proceeds from such events. A typical convertible preferred stock also enables venture capitalist investors to convert their shares into common stock according to a predetermined formula and to vote on major stockholder issues such as the election of directors and a change of the company’s core business activity.
