Exit strategies of venture capital financing
When you check for the initial funding processes, so it is also essential to know about the exit strategies. A business holder or an entrepreneur always take capital from venture capital for the development and expansion of their business. But, a venture capital only invests when they have an excellent exit strategy. Seed-stage, production stage and many more are the primary initial stages. Similarly, there is one final stage that is called the exit stage. The stage includes all the write-offs, IPOs, liquidations and validations.
At a point of time, the venture capital thinks to stop investing. So, either they can sell the private company or merge with other partners. The partners can be the needy person of stocks, cash or may be stock and cash both. So, here ends the responsibility of the venture capital.
IPO is the best route for venture capital to share. IPO is also called Stock Market Launch. They have to check the public offering clearly. They will never hand over the shares or sell the company to the one where the venture capital will be in loss, or the company will be in danger. An example is Facebook. Well, Facebook is a huge company. So, they are opening an ample opportunity for shares in the market according to the public offering.
Normal liquidations refers to write-offs. But this way the venture capital can’t deal confidently. The venture capital may refuse or go with the flow.
So, disinvesting has some more other parts, where the venture capital ought to sell or share the private company.
Bankruptcy: If the company is ruined financially, they can’t get any support from anywhere. None knows whether the expansion can be the same again after the seed stage. So, this can be a reason for the venture capital for disinvestment.
Buy-back: If the company is progressing vigorously, then they have the potential to buy their own shares from the venture capitalist. This criterion leads to buy back of the private company from the venture capital.
These above two scenarios are like a quick rescue for the venture capital. But, the direct or correct way of selling or sharing is only through a public offering or limited partners. The most accessible option would be selling the company when the venture capital finds a typical buyer who will be having a fair amount of money to invest. The standard buyer can be achieved through a network or a mediator. This is called disinvesting in an Over-The-Counter market.
Reliance is a big company started in Mumbai. It is ranking in India. Due to a public offering, Reliance started sharing the company. This is how it achieved excellent power in the market.
“Never forget the strategies before you initiate.”