If you’ve built a startup to the point where it could use a venture-capital investment, how do you pick between an East or West Coast VC firm?

You might think the whole premise is wrong – what difference does it make? Money is money, right? Based on my experience investing in startups, listening to hundreds of business plan presentations, interviewing more than 200 entrepreneurs and dozens of venture capitalists, the answer is that there are big differences between East and West Coast VCs.

To pick the right ones – and a blend is certainly possible – you must understand how VCs will perceive your startup and how they differ. Moreover, if you make the wrong choice, you risk suffering the ultimate indignity for an entrepreneur: selling your company and seeing a disproportionate share of the proceeds go to your VCs rather than to you and your key executives.

Related: Will Investors Ever Learn to Avoid Money-Losing Companies?

Read on if you want to understand liquidity preferences – one of the better-kept secrets of the VC industry -- that could lead to that unpleasant outcome. East and West Coast VCs take a different approach to liquidity preferences and it is critical that you understand them before you take capital from them.

But before explaining this, let’s examine the basics of your East vs. West decision in sequential order.

1. Find the fit with the industry and your stage of growth. VCs generally like to invest in companies headquartered nearby – but they make exceptions. If you are on the West Coast, odds are better that you will get financing from local VCs.

What’s interesting is that if your startup operates from the East Coast, it may be worth getting West Coast VCs to participate in financing you because – as we’ll see later – they are often willing to put a much higher valuation on your startup, meaning you get to keep more of your stake.

But the West Coast VCs prefer not to invest in the earliest rounds of financing – for example, to pay for building your prototype and getting your first customer. Conversely, they are very anxious to invest in your startup if they see great growth potential, like you and your executive team, and have recently lost out on a big capital gain that one of their VC rivals captured by investing in one of your competitors.

2. Pick VC partners who fit your style. When you choose a VC, you are not picking a firm as much as you are the individual partner from the VC firm who will serve on your startup’s board of directors. While there are exceptions, West Coast VCs are more intuitive about their decisions while East Coast ones are more analytical. Go with VCs whose approach matches yours.

If you seek to raise capital from an East Coast VC, be prepared to answer specific questions: How big is the addressable market? How fast is it growing? What specific product features will you offer that will convince customers to buy from you instead of competitors? What evidence do you have to back up these claims?

Related: How to Always Be Ready to Adapt Your Business to Change

West Coast VCs are more laid back. If they see something in your startup that reminds them of their previous successes, they will bet on you. They know that it was impossible to predict how successful Facebook or Google would be when VCs bet on them. But if they like your market, your startup’s ability to penetrate it, and your team’s ability to execute, they know they will make a big return by investing.

Finally, VCs from both coasts are known to bring in former investment bankers as partners. Such bankers are good at helping you to sell your business to another company or to manage an initial public offering, but they do not know much about how to grow a startup to the point where it can realize such an exit. If you need growth advice, don’t invite a former investment banker on to your board.

3. Negotiate your best deal. Unless you are a VC or a lawyer who works with them, you probably have not heard of participating preferred – an innocuous sounding term that should strike fear into an entrepreneur’s heart. Virtually all East Coast VCs demand participating preferred, while West Coast VCs are more flexible.

Participating preferred is an investment deal term that makes sure that the VC gets most of the value of your startup when it’s sold – especially if you sell it for a lower-than-expected price. Generally, participating preferred means that when your startup is sold, the VC gets its money in its totality before anyone gets any money out, and then participates up to an agreed-upon multiple (say, 3x) of its investment, together with everyone else.

Consider this example. A VC with a 3X participating preferred invests $50 million in your startup for a 60% stake. Your startup is sold for $100 million and you would expect that the VC would get $60 million of that – leaving the other $40 million for you and your executive team (basically, all the Common shareholders – which include the team).

But the VC gets more. It gets $50 million of the proceeds and $30 million more – which is 60% of the remaining $50 million. That gives the VC $80 million -- 80% of the proceeds, leaving you and your team with a mere $20 million.

Related: How to See Your Startup Through the Eyes of Investors

There are other scenarios that could make the outcome even worse for you – and it will only work out fairly for you if the exit value is so high that the VC ends up being better off by foregoing the participating preferred rights.

What can you do about it? If you invest in the first round of financing, you can set terms so that you only get 1x preferred, giving you the right to get only one times your money back before the other investors get a piece of the pie. You are more likely to get this on the West Coast because participating preferred is less common there.

And if you are an East Coast company, you ought to create a competitive bidding process among West Coast Vcs. This will give you a valuation that could be twice as high as it would be if you went solely to an East Coast VC.

And you could ask the West coast VCs for a “clean term sheet” – meaning that it accepts a 1X preferred instead of a 3X participating preferred one – and gives your startup a higher valuation which means that it gets a smaller share of your company’s equity than it would at a lower valuation.

These three steps should lead you to the best coast’s VC for your startup.