The negative liquidation preference is an alternative investment model in startup financing that represents a special arrangement in the event of liquidation. Here, investors do not receive preferential access to the assets, but only a share that is lower than their original investment. This means that the founders are paid out first, which encourages them to stay with the company in the long term.
This regulation minimises the pressure to liquidate quickly and promotes sustainable growth. Negative liquidation preferences are therefore particularly relevant in early financing rounds, as investors are willing to accept these conditions in order to support innovative business models.