Preferred shares are a relatively complex equity security which provide further protections for investors. The rights attached to these shares are entirely up for negotiation, and can be tailored to the investor's needs. The key question is, "what exact preference is being given to these shares over other shares?" Preferences can relate to payment of cumulative dividends, payment of the initial investment plus unpaid dividends etc. These features protect early investors from more powerful investors in future rounds of equity financing but can also be unattractive to those future investors and deter them from investing.