Liquidity Event - Launchopedia

An event that allows a VC to realize a gain or loss on an investment. The ending of a private equity provider’s involvement in a business venture with a view to realizing an internal return on investment. Most common exit routes include Initial Public Offerings [IPOs], buy backs, trade sales, and secondary buyouts. (See also: Exit Strategy.)³
This occasion represents the common exit strategy of most entrepreneurs and investors. When a corporation is purchased (through a merger or acquisition) or when an IPO is made, equity is converted to cash.⁴
Liquidity event is the way in which an investor plans to close out an investment. Liquidity event is also known as exit strategy.⁵

Liquidation

Liquidation Preference

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Definitioner

Venture Capital / Venture Capitalist

Venture

Venture is often used for referring to a risky start-up or enterprise company.⁵

Exit Strategy

A fund’s intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates, including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company’s shares after an initial public offering (IPO), a sale of the portfolio company, or a recapitalization.³
This is a company’s negotiated approach whereby investors are given an event or time within the development of their company to receive their return on investment (ROI). This can be achieved through a liquidity event, where their equity is converted into cash.⁴
Exit Strategy is the way in which a venture capitalist or business owner intends to use to get out of an investment that he/she has made. Exit Strategy is also called liquidity event.⁵

Exit

Exit is the sale or exchange of a significant amount of company ownership for cash, debt, or equity of another company.⁵

Equity

Ownership in the capital of a Company. In corporations, it is called “stock”; in limited partnerships or LLCs, it is called “interests” or “units.”³
This designation is given to a stockholder’s ownership in a company. The amount of ownership is obtained when an individual or corporation purchases one or more shares of stock (equity shares). The more equity purchased, the greater the ownership.⁴

Return on Investment

(ROI) This term is also referred to as the rate on return (ROR) or rate of profit. It is the amount of money that is gained in a past or existing investment. For example, angel investors tend to invest in startups and early stage companies. Because such investment is considered to be risky, they expect a large ROI to compensate for such risk.⁴
Return On Investment or ROI is the profit or loss resulting from an investment transaction, usually expressed as an annual percentage return. ROI is a return ratio that compares the net benefits of a project versus its total costs.⁵

Private Equity

A company ownership position that is not listed and cannot be traded on a public securities exchange. Issuance, ownership and exchange of private securities are regulated differently from those of public securities under federal and state law.¹
Equity securities of companies that have not “gone public” (are not listed on a public exchange). Private equities are generally illiquid and thought of as a long-term investment. As they are not listed on an exchange, any investor wishing to sell securities in private companies must find a buyer in the absence of a marketplace. In addition, there are many transfer restrictions on private securities. Investors in private securities generally receive their return through one of three ways: an initial public offering, a sale or merger, or a recapitalization.³
Private equities are equity securities of unlisted companies. Private equities are generally illiquid and thought of as a long-term investment. Private equity investments are not subject to the same high level of government regulation as stock offerings to the general public. Private equity is also far less liquid than publicly traded stock.⁵

Merger

A combination of business entities under which efficiency improvements are expected to be achieved from potential synergies by eliminating duplicate factors of production such as plant, equipment and labor and by the more efficient use of capital driving increases in revenues and profits in the resulting company.⁶

Liquidity Event

An event that allows a VC to realize a gain or loss on an investment. The ending of a private equity provider’s involvement in a business venture with a view to realizing an internal return on investment. Most common exit routes include Initial Public Offerings [IPOs], buy backs, trade sales, and secondary buyouts. (See also: Exit Strategy.)³
This occasion represents the common exit strategy of most entrepreneurs and investors. When a corporation is purchased (through a merger or acquisition) or when an IPO is made, equity is converted to cash.⁴
Liquidity event is the way in which an investor plans to close out an investment. Liquidity event is also known as exit strategy.⁵

IPO

Initial Public Offering.

IPO (Initial Public Offering)

(IPO) The sale or distribution of a stock of a portfolio company to the public for the first time. IPOs are often an opportunity for the existing investors (often venture capitalists) to receive significant returns on their original investment. During periods of market downturns or corrections, the opposite is true.³
(IPO)This is a private corporation’s first-time sale or allocation of a stock that is made available to the public. IPOs can be distributed to both young and established companies who seek to expand or warrant public trading.⁴

Corporation

A legal entity structure for businesses enterprises which are typically chartered by a state or the federal government, under which ownership is held by shareholders.⁶

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Acquisition

A process under which a company acquires the controlling interest of another company.⁶

Related Terms Buyout | Merger Related Articles Founders: Do You Have An Exit Strategy?

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