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Strategic Planning for Founders: Navigating the VC Exit
As an entrepreneur, there may come a time when you desire complete independence from your venture capital partner. This means having full control over the business without the influence of the venture capitalist. When this happens, the venture capitalist will sell their equity ownership in the business.
It’s important to note that venture capitalists are not interested in owning a minority or majority interest in your company indefinitely. Their goal is to invest in a business, help it grow, and eventually sell their position to generate capital gains for their venture capital fund. The only way a venture capitalist can receive a financial reward is by converting ownership into cash. This is typically done by selling their position in your company. Venture capitalists receive a bonus based on the capital gains they generate, and this comes in the form of a carried interest in the venture fund’s profits.
Therefore, it’s important to plan for the day the venture capitalist will sell their ownership position in your company. If you do so, you can assist the VC in generating capital gains, while retaining complete control over your business with your management team.
Now, let’s take a closer look at the ways in which a venture capitalist can exit their investment.
