Exiting: Distressed Value Realization in Venture Capital

Abstract

Venture capital exiting is the complex process of monetizing venture capital’s illiquid investments. Exiting is the final phase of the venture capital process and the consequence of all decisions made by venture capitalists throughout the entire venture capital process. Exit options can be classified as preferred, compromised, or undesirable. The most attractive exit choices for venture capitalists are trade sales and IPOs, but substantial realization of value is likely to occur only in one (or maximum two) out of every ten venture capital exits. Compromised and undesirable exits account for the remaining exits. There are also numerous ways venture capitalists can use exits to their advantage. The most predominant of venture capitalists’ adverse behavioral patterns include forcing premature exits, implementing a “pump-and-dump” strategy, and engaging into “window dressing.”