Zombie Equity

Zombie Equity refers to equity in a company that is economically unlikely to receive proceeds in an exit because senior securities (debt and/or preferred liquidation preferences) are expected to absorb all value, leaving common with little to no payout. In venture portfolios, Zombie Equity can persist when companies continue operating without a realistic path to clearing the preference stack, and Zombie Equity creates incentive misalignment and complicates retention and fundraising.

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Ryan Roberts Startup Lawyer
Ryan Roberts is a startup lawyer with more than two decades of experience advising on venture financings and M&A transactions totaling more than $1 billion. He is the author of the Amazon bestselling startup law book Acceleration.