Concept · Fundraising and equity

Preferred stock vs common stock

Also called: preferred stock, common stock, preferred shares, common shares, preferred, common, share class, classes of stock

The two main kinds of shares in a startup. Founders and employees usually hold common stock. Investors in a priced round usually receive preferred stock, which carries extra rights such as a liquidation preference.

For example: A founder holds 4 million shares of common stock. A fund buys 1 million shares of preferred stock in the Series A. Both own part of the company, with different rights.

Connects to 4

• Equity Concept
• Liquidation preference Concept
• Priced round Concept
• 409A valuation Concept

This glossary is plain-language orientation, not legal or financial advice. Before you decide on a company structure, a contract, taxes or a fundraising deal, talk with a lawyer or an accountant.