Hey there,

Alberto here. This Tuesday, we're diving into something that could literally save you thousands of dollars on your next investment.

Most investors think late-stage deals are safer. Less risk, closer to exit, right?

Wrong. And it all comes down to one thing you probably don't know about: the type of stock you actually own.

Read time: 3 min 23 sec 🕒

Here's what's happening in SPV deals right now. Individual investors like you are getting common stock while the really smart money is buying preferred stock.

Same company. Same investment. Completely different outcomes.

The difference? In a down scenario, preferred shareholders get paid first. Common shareholders get what's left—which is often nothing.

Let's say a company sells for $500 million. Preferred investors put in $300 million with what's called a "1x liquidation preference." That means they get their $300 million back first, no matter what. The remaining $200 million gets split among everyone else based on what they own.

If you're holding common stock? You're competing for crumbs at the bottom of that $200 million pile.

There's a practical reason this happens. Most SPV deals for individual investors involve smaller investments, $100K to $5M. That size typically aligns with employee stock that's already common.

Institutional investors with $10M+ minimums? They negotiate for preferred shares. They have leverage. You don't.

But here's what matters: preferred shares still provide downside protection even when you can't negotiate for them directly. Understanding the difference between common and preferred is what separates smart investors from ones who get blindsided.

This matters most when exits don't go as planned.

In an IPO, preferred shares automatically convert to common stock. Everyone wins proportionally. It's clean.

But in an M&A deal (acquisition)? That's where preferred stock saves you.

Preferred shareholders have liquidation preferences that act like a safety net. Common shareholders don't. In modest exits, that difference is the entire return or the entire loss.

The brutal truth: most investors don't realize they're holding the riskiest class of stock in the company they think is their safest investment.

If you're evaluating a late-stage deal right now, ask yourself three questions.

First: Am I buying common or preferred? If it's common, understand you're taking on more downside risk regardless of how "safe" the company looks.

Second: What's my actual exit scenario? IPO means common vs preferred doesn't matter. M&A means it matters a lot.

Third: Is there real valuation arbitrage? Sometimes, common stock trades at a discount to preferred stock in high-growth companies heading to IPO. That's worth it. Most of the time? It's just cheaper because it's riskier.

The mistake most LPs make is treating common and preferred like they're the same investment. They're not. A $100K check for preferred shares is fundamentally different from a $100K check for common shares in the same company.

Understanding this isn't about avoiding common stock. It's about pricing risk correctly and making decisions with your eyes open.

This is where theory meets practice.

Every Thursday morning, VIP members get a featured investment opportunity hand-picked by our team. Real companies, real deals, real structures—with full breakdowns of what you're actually buying (common or preferred, liquidation preferences, exit potential, everything).

We've analyzed over 800 investments. We know what separates winners from losers. We know which capital structures protect you and which ones leave you exposed.

Our VIP members don't just learn about venture investing. They get first access to the deals we'd make ourselves.

Want to join our VIP community?

Become a Founderscrowd VIP and get:

Thursday: First investment opportunity at a great discount (Only for VIP members). We're featuring an incredible deal where common stock is trading at a steep discount to preferred. This is exactly the valuation arbitrage we just talked about. VIP members get first look before it fills up.

Saturday: Your step-by-step guide to making your first angel investment without losing sleep. We're breaking down the whole process from choosing your first deal to structuring your investment. Everything you need to move from learning to actually investing.