Glossary - Exits
In the context of venture capital and private equity, an 'exit' refers to a method through which an investor such as a venture capital firm or angel investor realizes their investment in a company. This typically occurs when a company is sold (either privately or through a public market), merges with another company, or conducts an initial public offering (IPO). The goal of any exit strategy is to liquidate the investment allowing the investors to cash out and possibly make a significant profit.
Also known as
- Liquidity Event
- Harvest Strategy
Use cases examples
- Share Purchase Agreement: The Share Purchase Agreement outlines conditions under which the investor may sell their shares back to the company or to a third party, facilitating an exit.
- IPO Prospectus: The IPO Prospectus details the plan for taking the company public, offering a significant exit opportunity for early investors via the sale of their shares on the open market.
Considerations for investors
- Evaluating the best timing for an exit to maximize returns, considering market conditions and company performance.
- Assessing potential exit strategies for liquidity and risk management, including direct sales, IPOs, or mergers and acquisitions.
Considerations for founders
- Crafting an exit strategy that aligns with long-term business goals.
- Negotiating exit terms that ensure sustainability and growth post-exit, maintaining legacy and company culture.
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