The company got acquired for a headline number. My common shares were worth zero.
A liquidation preference stack decides who gets paid first — and I found out the hard way where common stock sits in that line.
Early angel, common stock only
Illustrative composite. A representative scenario built from how angel secondaries commonly play out — realistic numbers, written in the first person, not the record of a specific named person or company.
Deal snapshot
- Side
- Selling (attempted)
- Sector
- Developer infrastructure
- Stage at entry
- Pre-seed, common stock
- Original check
- $20,000
- Exit event
- Acqui-hire, ~$40M headline
- Proceeds to common holders
- $0
- Outcome
- No sale possible — position wiped out
A headline number that meant nothing to me
The company was acquired for a reported $40M — a number that made the tech press and that I briefly, naively, assumed meant a payday. It didn't. The company had raised several rounds of preferred stock, each with its own liquidation preference, and by the time all of those preferences stacked up, they consumed the entire purchase price. Nothing was left for common stock.
What a liquidation preference actually does
Preferred investors get their money back first — often with a multiple on top — before common holders see a cent. I'd known this in the abstract when I invested; I hadn't internalized that a modest acquisition, after several funding rounds, can consume the entire price in preferences and leave common holders like me with literally zero.
What I look at differently now
Before any secondary purchase or even a new primary check, I now ask what class of stock I'd hold and roughly how much preference sits above it. A company can raise a lot of money and still be a bad outcome for common holders if the exit doesn't clear the preference stack.
What to take from this
- Know your share class: preferred stock gets paid before common, often with a multiple attached.
- A large-sounding exit number doesn't guarantee any proceeds for early common holders.
- There is no secondary to sell when the underlying position is worth zero after an exit — this risk exists before any sale is even attempted.
Every angel who has held a position long enough eventually faces a version of this decision. For the mechanics behind stories like this one, see the guide to how secondaries work.