ELI5- When a company IPOs, isn’t it at the point that VCs have already extracted all the value, and they’re cashing out? Do they have to hold?
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Typically VC’s would cash out after the IPO. The idea being that hopefully the market values the shares at a higher rate than the current shareholders do and they’ll be able to cash out and go do another VC deal.
Over time, the company hopes to grow and become more valuable for the shareholders. However, this is less risky than investing in venture capital. Venture capitalists are ok with the higher risk profile of a start up company. The average shareholder is not.
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