An Initial Public Offering (“IPO”) can be a successful exit to a crowdfunded company. Once a company is able to register a successful IPO, a class of its shares are traded freely on a stock exchange. Thus, investors have a marketplace where they can offer their shares for sale.
A merger is the consolidation of two companies. Mergers often result in a lot of new resources, expertise and potential assets into the company. As a result, it may directly escalate the valuation of the business, giving a boost to the value of the shares held by early investors.
In the event of a buyout or acquisition, the company’s controlling interest is purchased by another party. That traditionally provides a liquidity event for early shareholders.
4: Dividend or Profit share
An issuer may offer a dividend or profit share arrangement as part of their subscription agreement. In this scenario shareholders are rewarded with a payment correlating to the success or milestones of the company.
Investing in a private company is very speculative in nature and these businesses often fail. The above are types of “exits” or events where an investor receives their money back or a return on their investment generally. However, there is no guarantee that any investment will achieve any one of these exits. In the event of bankruptcy, you may lose some or all your investment amount. We suggest you always consult your financial advisor before making any investment. You should never invest any amount that you cannot afford to completely lose without a change in your lifestyle.