Seniority

Seniority ranks preferred stock series against each other for the purpose of paying out liquidation preferences. The highest-ranked series is paid its full preference first; only what's left over is available to the next series in line, and so on down the stack. Series that share the same rank are 'pari-passu' — they're paid simultaneously, pro-rata by preference amount, if there isn't enough to cover the whole rank.

Why later rounds are usually senior

The standard convention is 'last money in, first money out' — the most recent round is typically the most senior, since later investors are usually only willing to invest if they're not stuck behind every earlier round's preference in a downside scenario. Some deals instead stack everything pari-passu (all preferred treated as one rank), which is friendlier to earlier investors but less common for later, larger checks.

Why it only matters when proceeds are scarce

At a large exit, every series' preference gets paid in full regardless of order — seniority never has to bind. It matters precisely in the scenarios everyone would rather not think about: exits at or below the total preference stack, where the order of payment determines who gets made whole and who doesn't.

Modelling it

Foundily's exit waterfall calculator takes a seniority rank per series (higher number = paid first) and resolves the full stack automatically, including pari-passu pro-ration within a tied rank and the residual distribution afterward.