Definition
Exit (Startup/PE)
An exit is the event through which investors realise the value of their stake — typically an IPO, acquisition or secondary sale.
Venture and private-equity funds invest to exit profitably within their fund life. Common exit routes are an IPO, a strategic or financial acquisition (trade sale), a secondary sale of shares to another investor, or, rarely, a buyback by the company or promoters.
The exit determines the actual return (IRR and MOIC) versus paper marks. In India, IPO exits have grown as a route for late-stage investors, while secondaries and M&A remain important, especially when public markets are weak.
Related terms
- Secondary SaleA secondary sale is the sale of existing startup shares from one shareholder to another, rather than the company issuing new shares.
- Internal Rate of Return (IRR)IRR is the annualised, time-weighted return on an investment that accounts for the timing of cash flows.
- MOICMOIC (Multiple on Invested Capital) measures how many times an investor's money has grown, regardless of how long it took.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.