IE, if the company does a down round, certain investors are privileged and get their money back first, without taking any of the loss.
Imagine if you own half of a billion dollar company, and an investor owns the other half, but has full guarantees on their 500 million dollars that they invested in your company.
That means that if the company's valuation goes down to 500 million and you sell, the investor loses 0$ and gets their full investment back, whereas you are left with nothing.
IE, if the company does a down round, certain investors are privileged and get their money back first, without taking any of the loss.
Imagine if you own half of a billion dollar company, and an investor owns the other half, but has full guarantees on their 500 million dollars that they invested in your company.
That means that if the company's valuation goes down to 500 million and you sell, the investor loses 0$ and gets their full investment back, whereas you are left with nothing.