That's where the difference between participating and non-participating preferences come in. Participating meaning that they also participate in the remaining surplus (so on your example $28M). Non-participating means they choose whichever is better (in your example they wouldn't since $20M is better than 10% of $100M, but if the company sold for $300M they'd choose $30M instead of the $20M).

Shitz, and here I go thinking I knew everything about these sorts of things by attending a 5-day lunch-time course at Capital Factory on Founders Academy Essentials… So much for those cap tables!

That's called participation and it's negotiated as part of the raise.

Non-participating: at liquidation, an investor chooses. They may either be paid back their investment (or more, if they have a multiple), OR they may choose to convert to common and get that percentage. They will, obviously, choose whichever pays them more =P

Participating is then also obvious: investors get their money (or negotiated multiple) out, and then get their ownership percentage of the remainder.

One thing that happens is companies very eager to raise monster rounds agree to shitty terms on all of the above. It's a lever founders and investors can manipulate to raise bigger rounds.

see eg https://medium.com/@CharlesYu/the-ultimate-guide-to-liquidat...

So your answer: $28m. Because if you agreed to 2x preferences, you're raising on shit terms and the investor probably got participation as well.

Generally if you raise on good terms, you can get a 1x non-participating.

But it's good to know the details.

$20M