- startup founded in early 2010's, and recently closed Series X fundraising. The company is now profitable and has a decent war chest - employees hold options/common stock and they're now worth $$$$ - with the recent MEGA fundraising, employees have the opportunity to purchase preferred stock, same price as the most recent fundraising - if IPO'd, there's a 9 month cliff from selling.
Is this a common practice? What are the benefits of purchasing preferred stocks, given I have commons? What else to look for? And what would you do as an employee in this instance?
In general, this sounds like an excellent deal that is not available to most startup employees. Most employees get common, and the big problem with that is that they're last in line to cash out and can get wiped out even if the company IPOs or gets acquired if other investors got preferred stock with better terms. For example, things like liquidation preferences mean that a VC might get back all the money they put in before the remainder is divided up between stockholders; a 2x liquidation preference means that if the startup sells for any less than twice the amount of last funding round, the common stock holders get wiped out. Warrants can also dilute the common shareholders in the event the startup does well. Again, be aware of the specific terms of the stock.