Investor exit strategies

An exit strategy basically identifies a plan for how investors in a venture will get their money back, and including at least a rough estimate of when.

If I invest in the stock of a publically traded company, my ideal exit strategy is to sell the stock when the price goes up. If I put money in a private business as an investor, rather than a founder, then I want to know how and when I can convert my investment back into money.

The three classic exit strategies are:

1. Grow the company to a level that it will be acquired by a larger company sometime in the future.
2. Take the company public with an initial public offering (IPO) of stock.
3. The managers who want to stay in the business buy out the investors with replacement capital from other investment sources, or from the profits of the business.