@frostico.base.eth

Most people don’t actually understand VC funding. When a startup raises money, that cash doesn’t go into the founder’s pocket. It goes onto the company’s balance sheet. And when the company is sold, investors get paid first. That’s because VC money comes with liquidation preferences. VC put in $10M: > Sell for $8M → investors take $8M, founders get $0 > Sell for $10M → investors take $10M, founders get $0 > Sell for $40M → investors usually convert to equity and share upside On paper founders may still own a large percentage. In reality, stacked preferences across multiple rounds can wipe them out in anything but a big exit. This is why confusing raise size with valuation or oversubscription with success is a mistake. Understanding liquidation preferences alone puts you ahead of most people talking about startups.

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