Startup Fundraising: The Dark Side of Preference Shares

Are preference shares bad for founders? Are they misused in Malaysia’s startup ecosystem? Can “bad” terms prevent startups from raising future funds and ultimately lead to failure? Is there a need for more standardised terms for preference shares in Malaysia?

In this episode of P&L, we explore how preference shares, while often used to secure investor confidence, could actually increase the chances of failure for founders if mismanaged.

Joining me is Kevin Brockland, Managing Partner of Indelible Ventures, who breaks down the basics and complexities of preference shares, the risks they pose, and how founders can protect themselves in negotiations.

We dive into:

- The differences between common stock and preference shares

- Key terms like liquidation preference, conversion rights, participating and non-participating shares, cumulative and non-cumulative.

- How preference shares can impact future fundraising rounds and founder incentives

- Why and how venture capital investing differs from private equity

- The importance of standardising preference share terms in the ecosystem

- Learn how to navigate preference shares and ensure they don’t become a pitfall for your startup’s growth.