Not every company will reach a large liquidity event.
In a liquidation event the company’s business is discontinued and assets are sold to pay off the company’s debts and then pay off shareholders with any remaining capital.)Ī successful exit or liquidity event for an investor is one in which the value of their shares in your company increases substantially from the time they invested in your company to the time they convert to cash. (A liquidity event is not to be confused with the liquidation of a company. After a holding or lock-up period specified by the SEC or other regulatory body of 90 to 180 days, existing investors may choose to sell some or all of their holdings. While an IPO is not technically a liquidity event (it is actually another investment event), it can provide liquidity to shareholders. Investors can also see liquidity through IPOs (initial public offerings). The most common liquidity event is an acquisition, where a company is acquired by another company or private equity firm. A liquidity event is something that converts an investor’s equity in your company into cash. Your investors, and you, will make money when your company reaches a successful liquidity event. Companies that don’t raise capital self-fund, or use alternate forms of capital covered in the next chapter.
#Tier 1 venture capital firms professional#
Less than 25% of all startup funding is done through venture capital, either in the form of friends and family funding (24%) or through professional venture capital firms (1%). Not every company is attractive as a venture capital investment. Venture capital can be provided in exchange for equity (an ownership share in the company) or in exchange for debt. This type of capital is generally referred to as venture capital, and can be provided by both professional investors (venture capitalists) and private individuals (angel investors). So you want to raise money for your startup?īefore you decide if you should raise money, it is important to understand that not every company is fundable.įundable, for our purposes, means that your company is attractive to investors that provide growth capital to high-risk, high-growth-potential, early-stage ventures.
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