Matt Matros started Protein Bar with everything on the line—his savings, a loan, and maxed-out credit cards. He turned that risk into a $44 million valuation when private equity giant L Catterton came knocking. But what seemed like a dream deal quickly turned into a cautionary tale.
When Matt decided to roll 40% of his equity, he thought he was setting himself up for an even bigger payday down the road. What he didn’t foresee was the power of a liquidity preference, which gave L Catterton the right to take their money out first—plus interest—before Matt could see a dime. Now, years later, Matt’s equity is likely to be worth nothing, even if the company sells.
For anyone considering rolling equity in a deal, Matt’s story is a stark reminder of the risks involved. Before you sign on the dotted line, make sure you fully understand the implications of a liquidity preference.
In this episode, you’ll learn:
- The hidden risks of rolling equity and how it can jeopardize your financial outcome.
- The dangers of liquidity preferences and why they matter more than you might realize.
- Key questions to ask before you roll equity to ensure you’re protecting your financial interests.
- How to evaluate private equity deals with your long-term financial health in mind.
Quote of the Week
Rolling equity might feel like a smart bet, but if you’re not first in line when the money flows out, you could end up with nothing.
– Matt Matros, Founder of Protein Bar
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