A liquidity event is a transaction or occurrence that lets owners or investors turn an ownership stake into cash or another realizable asset. Investors generally receive no return until one occurs, so founders should consider the eventual exit early. section 8.1
Common exit routes include:
- Merger and acquisition (M&A): combine with a similar company or sell to a larger one, potentially bringing cash to investors. section 8.1
- Initial public offering (IPO): list part of the company’s stock on a public exchange so investors can buy it. section 8.1
- Sale to a friendly individual: cash out without combining two entities, allowing investors and founders to be paid. section 8.1
NovaSoft’s uncomfortable reality
NovaSoft was unlikely to reach an IPO, and few buyers wanted a document-management company. Its investors therefore needed the company to perform well enough for someone to acquire it and limit their losses. section 8.1
