Exit Strategies for Venture Capitalists

Venture-Capital-Exit-Strategies

An important feature of venture capital investing is the exit strategies. Exit strategies take on various forms, but it is essential that a startup put one in place for its VCs. The exit occurs in the form of liquidation or disinvestment in the final stage of the venture capital funding. The main types of disinvestment/liquidation are trade sales, IPO, write-offs, and Buyback.

Trade Sales
In this type of strategy, a company is merged with an acquirer or sold for cash, stock, or a combination of both.

IPO
If the company has performed well, the venture capitalist will take the IPO route. This involves issuing shares that are registered for the public offering. The venture capitalists get their portion of shares and put them in the open market for trading.

Write-offs
Write-offs are voluntary disinvestment that may or may not result in proceeds.

Buyback
In this strategy, the entrepreneur buys back the investment share from the VCs. The entrepreneur takes the company back to being a privately held company.

Apart from the above four types of disinvestment, bankruptcy is another options. The company or firm may just go bankrupt.

References

http://www.huffingtonpost.com/david-drake/six-startup-exit-strategies_b_8254780.html

http://financetrain.com/exit-strategies-for-venture-capital-funds/

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s