Imagine I give you $1M for 10% of your business. You now own 90% of a business that has $1M in assets. You easily sell the whole business for $900k (giving away $100k to the buyer, basically), give me back my 10% * $900k = $90k, and keep the remaining $810k for yourself.

Preferred shares are a mechanism for preventing you from immediately liquidating my capital. An investment of time can't be liquidated as easily, so preferred shares are generally only for those making liquid investments.

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It seems there are probably other mechanisms for dealing with this problem, but this explanation makes _some_ sense.