The study of venture capital exit has started gaining momentum since the
last decade. Though valuation and pricing still remain the important areas
in decisions relating to exit, other factors like the selection of appropriate
timing, optimal exit route, etc. too are being studied extensively. This
report summarizes the studies relating to the exit route and exit timing of
venture capitalists and provides an optimal exit strategy. Though this report does
not explicitly consider the factors influencing the exit design involving exit
route and exit timing, these factors have been mentioned while explaining the
other major objectives. Of the studies related to decisions regarding the optimal
exit route, identification and grouping of five basic routes have been reviewed
and summarized. Additionally, certain variants relating to the exit routes, like
the partial exits, foreign IPOs, use of convertible securities, etc., have also
been covered usefully. Finally, a review of the studies relating to the exit
timing decisions has been made. Studies related to this commonly acknowledge
the fact that IPO can be used for early exit and trade sales, buybacks,
secondary sales and write-off, in the descending order. Based on the studies related to
exit type and timing, appropriate exit strategies have been evolved with
different combinations of type and timing. This is expected to give some
beneficial guidelines to the executives of venture capital firms as well as to entrepreneurs. |
