Exit Strategies for Venture Capitalists


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.

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 are voluntary disinvestment that may or may not result in proceeds.

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.





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