Who gets what

Play this lesson

An offer for the studio

Years ago, an investor put US$10 million into Shard Garden for 25% of it. Now a bigger company offers to buy the whole studio. Kai and Remy want to know what everyone would get.

The investor's shares carry a liquidation preference, which Course 1 named: who is paid first when the company is sold.

The greater of two

In the model company charter from the NVCA, the US venture capital association, each preferred share gets "the greater of" two amounts:

(i) a multiple of what the investor paid for it, often 1 times: their money back.
(ii) what it would get if it were turned into an ordinary share.

This is a 1x non-participating preference: one or the other, never both.

Quick check

With a 1x non-participating preference, Kai's investor gets their money back and then a share of what is left.

Show the answer

False

Non-participating means the greater of the two, not both: the money back, or the investor's share of the sale.

Try it

Who gets what

Tap a sale price. Find the one where the founders and team get their full 75%.

Try it in the lesson

Do the math

At US$20 million, what do Kai, Remy and the team get together?

  1. US$10 million, half the sale
  2. US$15 million, their 75%
  3. US$20 million
Show the answer

US$10 million, half the sale

25% of US$20 million is only US$5 million, so the investor takes the US$10 million back instead. The other US$10 million is left for everyone else, though they own 75%.

Where it flips

The investor takes their 25% instead once 25% of the price is more than US$10 million. That happens above US$40 million.

Below it, the preference protects the investor's money. Above it, everyone shares by what they own.

Quick check

Above what sale price does Theo expect the investor to take 25% instead of the US$10 million?

  1. US$40 million
  2. US$10 million
  3. US$25 million
Show the answer

US$40 million

US$10 million is 25% of US$40 million. Above that, 25% of the price is worth more than the money back.

Participating: both

Some deals add participation: the investor takes their money back first, then also shares what is left by what they own. The NVCA charter has a version for this too.

At US$20 million: US$10 million back, then 25% of the US$10 million left.

Do the math

With participation, what does the investor get from a US$20 million sale?

  1. US$12.5 million
  2. US$10 million
  3. US$5 million
Show the answer

US$12.5 million

US$10 million back first, then 25% of the remaining US$10 million: US$2.5 million more. Kai and Remy read every preference before they sign.

On the studio board

The studio adds a decision to the board:

Before any offer is answered, Theo works out who gets what at that price, preference first. New investors get 1x non-participating preferences, or the board hears why not.

Bolt says: Next: public companies and IPOs.

Fact-checked 12 October 2026