(2009-03-03) Multiple Liquidation Preferences

Venture Capital firms are bringing back Multiple Liquidation Preference-s, where they get back a multiple of their investment (not just break-even) before any other investors get the 1st dollar from a Buy-Out. Fenwick & West, which analyzed the terms of venture financings for 128 companies headquartered in the San Francisco Bay area, found that 23% of those deals included liquidation preferences that were higher than the amount invested, up from 16% from the third quarter and 15% from a year ago. Ten percent of the multiple preferences included the right to a return of three times or more, a provision that disappeared from term sheets as the industry recovered from the tech crash.