Glossary

Preferred Equity

Definition

Preferred equity is a class of investment that sits between debt and common equity in a company’s capital structure. Preferred equity holders receive priority over common shareholders for dividends and liquidation payouts but typically do not have voting rights. It is commonly used in real estate, private equity, and venture capital deals to provide investors with higher returns than debt but lower risk than common stock.

How does preferred equity differ from common equity?

Read more

Preferred equity holders get priority dividends and liquidation rights but no voting power, whereas common equity holders have voting rights but lower payout priority.

Is preferred equity riskier than debt?

Read more

Yes, because debt holders get paid first in case of bankruptcy. However, preferred equity is less risky than common stock since it has a higher claim on assets.

How do startups use preferred equity?

Read more

Startups often issue preferred shares to venture capitalists, giving them priority payouts, dividends, and potential liquidation preferences over common shareholders.

What are the benefits of investing in preferred equity?

Read more

Investors receive steady returns through dividends, lower risk than common stock, and priority over common shareholders in liquidity events.

Ready to kick-start your own fundraising journey?

Or want to know more about pre-seed funding?