Senior liquidation preference ranks one preferred class ahead of others in the exit waterfall — who gets paid first when proceeds are limited.

How it works

Each preferred series typically carries a liquidation preference (often 1x invested capital). Seniority determines order among series. Series B senior to Series A means B’s preference fully satisfies before A receives anything.

Some stacks are pari passu — same seniority, pro rata sharing. Recapitalizations may wipe or subordinate older preferred, issuing new senior preferred to incoming investors.

Model a $40M exit with $30M of senior preferred ahead of you — common may see zero even though the company “sold.”

Why it matters

• Founders: Before signing a down round, model waterfalls at 0.5x–2x exit values with the new senior stack.
• Investors: Later investors demand seniority to justify new capital in troubled companies; earlier investors fight to avoid subordination.

Common mistake

Assuming all preferred shares are equal — charter seniority language silently reallocates proceeds in any exit below total preferences.

Related ideas

• Liquidation preference
• Liquidation waterfall
• Senior preferred