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The class of equity demanded by investors in most venture capital financings is preferred convertible participating shares (PCP). As discussed in prior lectures, this class of shares has conversion rights to common stock. The shares will have both voluntary and mandatory conversion provisions. It also grants a liquidation preference with participation rights after return of the liquidation preference. The participation rights may be capped at a certain amount; otherwise, voluntary conversion rights would be largely irrelevant, as the value of the common stock would never eclipse the value of the preferred stock. There will always be a mandatory conversion provision in the equity instrument. As discussed in the convertible stock lecture, mandatory conversion provides comfort to later purchasers of shares that there is only one class of stock to consider. Continuing with the subject of participation rights, the nature of the shares may allow other shareholders to catch up before participations rights begin. In this situation, the terms may allow for unlimited participation rights.