What is an exit?
An exit is when you as an investor sell your ownership and realize a return (or loss). In unlisted companies, there are fewer exit opportunities compared to the exchange.
Common exit paths
- IPO — The company goes public and you can sell your shares on the exchange (after any lock-up).
- Acquisition (M&A) — Another company buys the company. You get paid for your shares.
- Secondary trading — You sell your shares to another private investor via a platform or broker.
- Buyback — The company buys back your shares.
- Dividends — Ongoing returns through dividends (uncommon in early-stage companies).
Factors affecting your exit
- Company maturity and growth
- Market climate for IPOs
- Lock-up periods
- Right of first refusal clauses
- Your own time horizon and liquidity needs
Tips
- Have an exit plan already at investment.
- Diversify — don't bet everything on a single exit.
- Understand tax implications of different exit paths.
Summary
A clear exit strategy is as important as the investment decision itself. Plan ahead and be flexible with timing.