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?
In: 0
Normally the VCs do not cash out the value of the company. All the revenue of the company is typically fed back into the company to increase its value, it is not paid out as dividend to the VC. The way a VC cash out is by selling their shares to someone else now that the company is worth so much more then when the VC invested in it. An IPO is a way of helping the VC do this and prepare for the VC to cash out. It is much easier for the VC to find buyers if the company is public. So the IPO typically comes when the VC have increased the value of the company as much as they can or want.
Latest Answers