The three principal ways in which venture capital companies exit venture-backed companies are: Select one: A....

The three principal ways in which venture capital companies exit venture-backed companies are: Select one: A. selling to a strategic buyer, buying out the founder, and offering shares to the public. B. selling to a strategic buyer, selling to a financial buyer, and buying out the founder. C. selling to a strategic buyer, selling to a financial buyer, and offering shares to the public. D. None of the above.

Solutions

Expert Solution

Answer: C. selling to a strategic buyer, selling to a financial buyer, and offering shares to the public.

Explanation:

The three principal ways in which venture capital companies exit venture-backed companies are selling to a strategic buyer, selling to a financial buyer, and offering shares to the public.

The first way is selling the company’s equity to a strategic buyer so that the strategic buyer can generate value through collaborations between the acquisition and the company’s current productive resources.

Another important way is selling the company’s holding to financial buyer. Financial buyer i.e. a private equity company buys venture capital company with a view to hold it for short span of time and then sell it on higher price to earn profit.

Last but not the least, option to venture capital company in order to exit is offering shares to the public i.e. bringing IPO (Initial Public Offering). In this method, the venture capital company offer the shares to the public in the primary market so that they can buy shares from venture capital company.

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