Exit strategy, also referred to as a
"harvest strategy" or "liquidity event",
is the method by which a venture
capitalist intends to get out of an
investment. It is a way of "cashing out"
venture capital investors to get
money out of an investment because they
are generally dealing with private
companies. Shares of private companies
cannot be sold as easily as when the
firm is publicly traded on a stock
exchange. So, even though a private
startup firm could be worth a
VC investors has
limited access to this wealth.
Broadly speaking, the exit strategy is
the first opportunity to trade shares in
a private firm for cash.
Examples of exit strategies include an
initial public offering (IPO)
bought out by a larger player in the
industry. An exit strategy is usually a
part of a formal venture financing