Exit

An exit is the liquidity event where equity holders convert their ownership into cash. The two primary exit paths are acquisition (another company buys the startup) and IPO (the company lists shares on a public stock exchange). Less common exits include management buyouts, secondary sales, and SPACs (Special Purpose Acquisition Companies).

Acquisitions are far more common than IPOs. Of venture-backed startups that achieve a successful exit, roughly 90% are acquired and 10% go public. Acquisition prices for VC-backed startups range from small acqui-hires ($5M-$20M, primarily to hire the team) to strategic acquisitions ($100M-$1B+, to acquire the product and customer base). IPOs are reserved for companies with significant scale ($100M+ revenue), strong growth, and the operational maturity to handle public market scrutiny.

The exit is where liquidation preferences, participation rights, and cap table structure really matter. In a large exit, everyone typically does well. In a modest exit, the payout waterfall (preferred shareholders first, then common) can mean that founders and employees receive significantly less than their ownership percentage would suggest. Understanding the cap table and preference stack is essential for founders to evaluate whether a given exit price is good for them personally.