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Exit Strategy

Definition

A plan for how founders and investors will eventually profit from their investment, usually via IPO or acquisition.

Deep Dive

An exit strategy is a comprehensive plan for how founders and investors will eventually liquidate their investment in a company to realize a profit or minimize losses. This strategy is crucial for venture capital firms and angel investors, who typically invest with a multi-year horizon and require a clear path to generating returns for their limited partners. For founders, an exit strategy defines how they will eventually monetize their ownership and potentially achieve financial independence.

Examples & Use Cases

  • 1A successful software startup planning an IPO to allow public trading of its shares and provide liquidity for early investors
  • 2A small biotechnology firm being acquired by a large pharmaceutical company for its promising drug pipeline.

Related Terms

Initial Public Offering (IPO)AcquisitionLiquidity Event

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