Participation Cap
Content
Definition
A Participation Cap limits the amount investors can receive in liquidation preferences, often used in preferred stock agreements to balance investor and founder interests.
Usage and Context
A participation cap limits the maximum return investors can get in liquidation preferences.
Frequently asked questions
- What is the liquidation preference participation cap? A participation cap limits the amount investors can receive in liquidation preferences.
- What is cap on preferred stock participation rights? A participation cap limits the maximum return investors can receive in liquidation preferences.
- What is a 3X participating liquidation preference? A 3X participating liquidation preference allows investors to receive up to three times their initial investment before common shareholders.
Benefits
A participation cap limits returns for preferred investors, balancing interests between founders and investors.
Conclusion
A Participation Cap balances interests by limiting returns for preferred investors.
