Exits are how VC funds return cash to LPs. Understanding the five real exit paths — and 2026’s market conditions — is essential for founders and investors alike.

1. IPO — Initial Public Offering

What it is: Company sells shares to public markets via a registered offering. Shares trade on NYSE, Nasdaq, LSE, etc.

When it makes sense: $100M+ revenue, profitable or clearly on path, strong multi-year forecast, defensible category.

2026 context: IPO window is partially open — AI and defense-linked companies lead. CoreWeave, Reddit, Astera Labs, and similar 2024–2025 IPOs set a baseline.

Pros: Brand, liquidity, currency for M&A. Cons: Public-company costs ($5–20M/year), quarterly disclosure, reporting pressure.

2. Strategic Acquisition (M&A)

What it is: Another company buys yours — for technology, team, customers, or market share.

When it makes sense: Strong strategic fit, clear buyer, acceptable valuation.

Typical structures: All-cash, all-stock, cash + stock, earn-out.

2026 context: Antitrust scrutiny (FTC, DOJ, EU Commission) slows mega-deals. Sub-$1B deals close more routinely.

3. Private Equity Buyout

What it is: PE fund buys the company, often leveraging debt.

When it makes sense: Cash-flow-positive, mature business, willing to optimize rather than blitz-scale.

Pros: Often higher valuations than strategic buyers; operational support. Cons: Leverage adds risk; founders often exit entirely.

4. Secondary Sale

What it is: Existing shareholders (founders, employees, early investors) sell shares to new buyers — usually during a priced round or via tender offer.

When it makes sense: Long-duration private companies; founders/employees need liquidity pre-IPO.

2026 context: Tender offers have become common for growth-stage unicorns (Stripe, SpaceX, OpenAI, Anthropic).

Pros: Liquidity without exit; aligns founder/investor risk. Cons: Dilutive if done poorly; regulatory disclosure concerns.

5. Acqui-hire

What it is: A “soft landing” acquisition focused on the team, often at fire-sale valuations.

When it makes sense: Product hasn’t worked; team is strong; company needs a graceful wind-down.

Pros: Employees land jobs; investors recoup some capital. Cons: Founders usually lose most equity value.

Exit frequency

Historically:

• ~5-10% IPO.
• ~40-50% M&A.
• ~5-10% PE buyout / secondary-driven exit.
• ~30-40% fail, acqui-hire, or wind down.

What founders should plan for

1. Build for multiple paths: Flexibility beats commitment to one outcome.
2. Know the preference stack: Your actual cash at $X exit depends on it.
3. Keep clean financials: Both IPO and M&A require them.
4. Develop strategic relationships 2–3 years before potential exit.

Practical takeaway

1. Founders: IPO is one exit path, not the only goal.
2. Investors: Portfolio-level exit strategy (M&A pipeline, IPO readiness, continuation funds) matters for fund DPI.
3. Employees: Understand vesting, acceleration, and preference-stack implications before assuming your options are valuable.

Further reading

• NVCA 2026 Yearbook: https://nvca.org/press_releases/nvca-releases-2026-yearbook-charts-a-venture-industry-in-transition/