Ultimately, venture capital firms are looking to make a divestiture of their share of your business among a 3 to seven year time line. This is not always the steadfast rule, however you need to remember that venture capital corporations are in the business of providing their investors with vital returns through their pooled capital funds. When trying for venture capital is imperative to debate the exit strategy wished by a possible VC firm.
Several individuals feel that all venture capital corporations are seeking to grow your business with the intent of having an initial public giving (or "IPO"). However, this is not usually the case. Many venture capital corporations, once a three to five year period, will request to divest the profitable business to a larger firm that's seeking to consolidate or take away a competitor. With the recent economic downturn, the demand for new initial public offerings has waned among individual and institutional investors. As such, many venture capital companies have begun to act like their personal equity counterparts by specializing in selling the business to a 3rd party.
However, taking a corporation public usually provides a a lot of higher come on investment than selling the business to a 3rd party. Additionally, publicly traded corporations have a certain status hooked up to their name once this method is complete. Finally, and IPO produces extra visibility for your complete name as more folks (principally individual investors) recognize your business. The drawbacks of engaging an initial public offering is that despite the upper come on investment, the senior officers are typically needed to stay on for at least one to 3 years once the IPO is complete. While this can be not a law, most investors can not purchase IPO shares if they recognize that the individual that runs the business intends to leave terribly quickly. A lot of like venture capital corporations, individual investors are wanting for robust growth from your company.
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