I was talking to a founder recently and ordinary vs preference shares came up during their fundraising discussions.

They knew both involved giving investors equity but weren't sure what the difference meant for them.

For founders who've raised investment, how would you explain it? And is there anything to watch out for?

The simple version is ordinary shares are basically the standard ownership, while preference shares can come with extra rights attached.

The bit I'd pay attention to isn't the name though. It's what those rights actually say in the investment documents.

This is where I got confused when I first started looking at investment terms. You can hear preference and think it just means the investor gets paid first, but there are quite a few different rights that can sit behind it.

The actual terms are more interesting than whether the shares are called ordinary or preference.

Things like voting rights, liquidation preference and what happens in an exit can make a much bigger difference to the founder.

This is one of those areas where I'd rather pay for proper legal advice than guess.

Saving a bit on the solicitor now isn't much of a win if you discover three years later that an investor has rights you didn't properly understand.