Liquidity events refer to specific circumstances where equity shareholders can sell their shares for cash.
Table: These are the quick understanding on the main ways investors and founders can exit a company.
Note: The actual exit process can be very complicated depending on the approach and the existing terms. It is going to be more complicated than investments.
| Popular Pathways | Quick Understanding |
|---|---|
| Initial Public Offering (IPO) | Ventures go public by selling most private shares in the public stock exchange market. |
| Merger & Acquisition | Strategic - Sale of the venture to another company while most shareholders cash out. Founders may need to stay to serve post-acquisition to oversee the integration process before being relieved from their original role. |
| Acquihire - Acquisition that targets specifically certain key talents in the ventures. Acquired talents get a new role in the new company and get compensated. The business of the original venture usually halts. | |
| Secondary Sale | Founders or shareholder sell their shares to other shareholders or within a secondary market |
| Liquidation | Selling company assets to pay off creditors, and remaining proceeds are paid to back shareholders. |
| Buyback | The company buys back the shares owned by the founders. |
| Redemption | Investors may sometimes force the sale of their shares back to the company or there is an agreed upon redemption based on specific conditions to withdraw their investment at a pre-agreed price and terms. |