FREE online courses on Venture Capital Funding - The Venture Capital Industry - Exits

 

Depending on the investment focus and strategy of the venture firm, it will seek to exit the investment in the portfolio-company within three to five years of the initial investment.

 

Initial Public Offering

 

The Initial Public Offering (IPO) is the most glamorous and visible type of exit for a venture investment. At public offerings, the venture firm is considered an insider and will receive stock in the company, but the firm is regulated and restricted in how that stock can be sold or liquidated for several years. Once this stock is freely tradable, usually after about two years, the venture fund will distribute this stock or cash to its limited partner investor who may then manage the public stock as a regular stock holding or may liquidate it upon receipt.

 

Mergers and acquisitions

 

Mergers and acquisitions by the original founders or another company represent the most common type of successful exit for venture investments. The venture firm receives stock or cash from the acquiring company and the venture investor distributes the proceeds from the sale to its limited partners.