Venture capital is a business of buying illiquid minority stakes and, a decade later, converting a few of them into cash. A fund's TVPI is an opinion, and its DPI is a fact. The exit is where the opinion becomes a fact, or fails to. This section covers the routes to liquidity for a venture-backed company and its investors: the traditional underwritten IPO, the direct listing, the SPAC merger (and the 2020–22 boom and bust), strategic and financial M&A, the "license-and-acquihire" structures of the AI era, and the mechanics that decide what investors actually receive. Those mechanics include liquidation preferences at sale, lockups, distributions in kind and holding periods. Secondary sales and tender offers, which have become a third exit route as companies stay private longer, are covered in Venture Secondaries & Liquidity.
What the study covers
- 1Overview: the exit problem in venture
- 2M&A mechanics
- 3IPO mechanics (summary)
- 4Key numbers
- 5Landmark exits and episodes
- 6Pitfalls
- 7How an expert thinks about it
- 8Glossary
- 9Related sections
Technical exhibits
Worked examples, checklists and case studies included with this study.
Exit Route Comparison Worked Example
One stylized company and four outcomes ($150m, $300m and $900m sales vs. a $1.2bn pre-money IPO): who gets what, by class, with lockup scenarios; plus a qualitative route-comparison matrix
IPO Process Lockups and Direct Listings
IPO timeline from bake-off to closing, pricing and allocation, the underpricing debate, lockup structures and early releases, direct listings, and how VCs distribute shares post-IPO
Spac Boom 2020 2022 Case Study
The SPAC structure, a computed dilution example showing why redemptions destroy value, the 2020–22 boom and bust with named cases, and the 2024 SEC rules