What is your goal with this structure? I mean, what is the advantage?

the stanford primer discussed some of this - i.e. Doing 50% preferred equity @7% and 50% redeemable preferred equity @ 17% so that you can retire the redeemable piece. Like most everything else, if you can find investors who agree to it, then you can do it.


One advisor I spoke with also mentioned it was a common structure to have a higher initial preferred return - i.e[redacted]% and then distribution flips to[redacted]in entreprenuer favor. This way, your investors continue to get upside. At some point they will want to be bought out and you can make a fair offer.

Would it have to be redeemed at a premium? How soon?

Not necessarily. Typically a liquidation value is negotiated upfront at mutually agreed terms e.g. 2x face. Timing again depends on what you negotiate as long as it conforms to any senior lender requirements.