Liquidation Preference Multiple
Definition
The factor applied to the original investment amount to calculate the minimum liquidation preference payout. A one times liquidation preference multiple means the investor receives at minimum the original investment amount before common shareholders participate. A two times multiple means the investor receives at minimum twice the original investment amount. Liquidation preference multiples above one times are considered aggressive terms and are uncommon in competitive seed and Series A markets.
Common Misapplication
The most common misapplication is agreeing to a liquidation preference multiple above one times without modeling its effect on founder and common shareholder proceeds across a range of exit scenarios. A two times liquidation preference on a three million pound investment means six million pounds must be paid to the preference shareholder before any common shareholder receives anything.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.5: The Liquidation and Exit Mechanics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Liquidation Preference Multiple. https://ffistandard.org/glossary/liquidation-preference-multiple/. 2026.