Liquidation Preference at Exit

This question practices a core equity financing concept in venture and growth investing, where preferred investors have priority over common shareholders when a company is sold or wound down. Candidates need to understand how contractual investor rights affect the order of payouts at exit, and how those rights are tied to the original investment amount and the terms agreed in the financing round. Interviewers ask this because liquidation preference is fundamental to understanding downside protection, ownership economics, and how different classes of equity are treated in a transaction or exit scenario.