A liquidation preference is the multiple of original investment (typically 1x) that preferred shareholders receive before common shareholders see any proceeds in a liquidity event. 'Participating' preferred also share in remaining proceeds pro-rata; 'non-participating' must choose between the preference and converting to common. Preferences are stacked by seniority or paid pari passu across series, depending on the charter. In a modest exit, preferences can leave common holders, including founders and employees, with little or nothing. A 1x non-participating preference is the market norm in most US venture deals.

Why it matters

In a strong exit, preference rarely matters. In a modest or down exit, stacked preferences across multiple rounds can leave founders and employees with nothing - a 'preference overhang.' Standard MedTech terms today are 1x non-participating.

Common pitfalls

•Accepting participating preferred 'just for this round' - it sets a precedent for every subsequent round.
•Not modeling waterfall scenarios at multiple exit values.

Sources

NVCA model docs · NVCA
Silicon Valley Bank - Healthcare Reports · SVB
PitchBook - MedTech Coverage · PitchBook
SEC capital-raising glossary: liquidation preferences · U.S. Securities and Exchange Commission

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MedTech terminology is full of pairs that look interchangeable but carry very different regulatory, clinical, and commercial consequences. Picking the wrong framework, pathway, or standard early in a project can add months to a submission, invalidate clinical evidence, or trigger an audit finding. Side-by-side comparison is the fastest way to surface those differences before they become costly mistakes.

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Common comparison patterns

Regulatory pathway choice - 510(k) vs PMA, 510(k) vs De Novo, Abbreviated vs Special 510(k).
Quality systems - QSR vs ISO 13485, QMSR vs QSR.
Software classification - SaMD vs SiMD, Locked vs adaptive AI.
EU frameworks - MDR vs IVDR, CE Mark vs UKCA.
Cybersecurity artifacts - SPDX vs CycloneDX SBOM, CVE vs CVSS.
Post-market actions - Recall vs field action, Removal vs correction.

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MedTech Terms is a vendor-neutral community resource sponsored by Blue Goat Cyber. Definitions are written for educational use and are not legal or regulatory advice.