Exit routes refer to the ways in which venture capitalists can sell their stake in a company and realize their return on investment. In India, there are several exit routes available to venture capitalists, which are discussed below.
- Initial Public Offering (IPO): An IPO is one of the most popular exit routes for venture capitalists in India. When a company goes public, the venture capitalists can sell their stake in the company through the stock market. This allows the venture capitalists to realize their return on investment and exit the company.
- Strategic sale: A strategic sale involves selling the company to a strategic buyer. This is often the case when a larger company wants to acquire the technology, products, or services of the start-up. In such cases, the venture capitalists can sell their stake in the company to the acquirer and realize their return on investment.
- Secondary market sale: A secondary market sale involves selling the stake in the company to another investor in the secondary market. This is often done when the company is not ready for an IPO or a strategic sale. In such cases, the venture capitalists can sell their stake in the company to another investor and realize their return on investment.
- Buyback: A buyback involves the company buying back its own shares from the venture capitalists. This is often done when the company has generated significant cash flow and wants to reduce the number of shareholders. In such cases, the venture capitalists can sell their stake in the company to the company and realize their return on investment.
- Merger: A merger involves two or more companies combining to form a larger entity. In such cases, the venture capitalists can sell their stake in the company to the newly formed entity and realize their return on investment.
- Liquidation: In some cases, the company may need to be liquidated due to bankruptcy or other financial reasons. In such cases, the venture capitalists can sell their stake in the company and realize their return on investment.
In summary, venture capitalists in India have several exit routes available to them, including IPOs, strategic sales, secondary market sales, buybacks, mergers, and liquidations. The choice of exit route will depend on several factors, including the stage of the company, the growth prospects of the company, and the preferences of the venture capitalists.