Objective

Common shares are a type of company stock typically issued to founders and employees when they start or join a startup. This form of equity is one of the “dirty secrets” of the startup ecosystem because it differs significantly from the Preferred Shares stock given to investors. As a key element of the capital structure, common shares represent an ownership stake, but owners of this stock are positioned last in the payment hierarchy during a significant liquidity event like an acquisition. This means that after all investors holding preferred shares have been paid out, common shareholders receive the remaining value, which can sometimes be zero.

Subjective

The disparity between Common and Preferred Shares is the most backward-feeling structure in the startup ecosystem. Seeing this foundational lack of fairness—where the people building the company are the last to get paid out—is a major source of internal tension. It explains why investing in the very early stage feels like correcting a structural issue. By injecting capital as an angel investor, you participate on different terms, allowing you to back founders in a way that’s actually value-additive, without the overhead and existential pressure of traditional funds.

Contexts

• #fundraising

• #startup-finance