&gt; 2) All these financial experts can figure out a way to protect their necks without leaving the employees necks under the axe.<p>Liquidation preferences are not the default in startup financing. They show up when money on better terms is not available.<p>Any management team is free to walk away from a term sheet that has liquidation preferences spelled out towards a term sheet that has VC buying common shares with no downside protection whatsoever, if such term sheet exists.