VC and founders, holding preferred shares, take money off the table first. If things get tight, later VC's may take 2+x preferences. Deals can be structured that return cash to the VC, wipe out the rest of the equity, and leave existing employees grants or bonuses for retention; this latter deal element is an incentive extended by the acquiring company, not an entitlement owed shareholders.
The later investors just barely made their money back, so the employee options were (probably) worthless as well. Google issued new retention to make up for the fact that the employees got squashed, but not every acquirer is so generous.
Is it normal for founders to have preferred shares? In our case the founders all have common stock (albeit a lot of it), and in fact it came with more restrictions than normal common stock, namely a 3-year restricted stock period similar to an option vesting period.
Dunno, but note that founders often hold board states, and VC has an incentive to make sure they can take some money off the table, else they can make it harder to complete the best deal VC thinks they can get, in the name of holding out for an actual return.
That's very normal; founders usually have mostly common, and sometimes have extra restrictions. The other commenter is right, though - anyone with influence in a transaction typically comes out better, and founders are often in such a position.
