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:
- A trade sale: In this scenario the company shareholders sell shares of the company to the investor.
- Sale of the assets of the company and distribution of the purchase price between shareholders.
- 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.