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Save for some, many venture capitalists stay with a business for a long time. From the business’ inception to its growth and flourish, they remain faithful to the company’s goals and endeavors, unwavering in support and presence. The same is true with some investors who have developed some sort of affinity for a particular company. From the initial public offering to the height of a bullish run—even through the bearish times—they remain invested. If they’re lucky enough, this loyalty will eventually pay off, and the company will grow to become a valuable piece of business property that yields a substantial profit.
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But one cannot play the markets forever, and sometimes, even the most loyal investor may want out in a particular investment due to several reasons (e.g., investment objectives have already been met or to mitigate impending failure). In all cases, however, individuals must have an exit strategy at hand before finally bowing out of a particular investment.
Exiting is straightforward for investors who own company shares via publicly traded stocks, as the shares can be easily floated back to the market where many other investors are willing to buy the stocks in their current prices. But for venture capitalists who own shares of private companies, getting out of the investment may not be as easy. In this case, the only exit strategy available for them is the first opportunity to transform their ownership (which is an illiquid asset) into cash (a liquid asset).
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