Investor Exits – how does that work?

An investor can be crucial to your startup, especially if this person brings in certain skills and a strong network. But sooner or later investors might leave the company, how does that work? These are three possible commercial options:

  1. A trade sale: In this scenario the company shareholders sell shares of the company to the investor.
  2. Sale of the assets of the company and distribution of the purchase price between shareholders.
  3. Initial Public Offering (IPO): This is a rare but very attractive option to be listed on a public stock exchange.

When you have a startup, you must be very aware of all the surrounding factors that can decide if a certain investment is right for you or not. Those could be Liquidation Preferences of the investor, ESOPs, taxes or an employment contract with the investor.