Exits & Liquidity
IPO
Initial Public Offering — the process by which a private company sells shares to the public on a stock exchange for the first time, enabling liquidity for founders, employees, and investors.
An IPO (Initial Public Offering) is the moment a private company first sells shares to the general public via a stock exchange like NYSE or NASDAQ. It's typically the largest and most complex liquidity event for venture-backed companies, often taking 9–18 months to execute and requiring investment bankers, securities lawyers, and public company financial reporting infrastructure.
In the traditional IPO process, the company works with underwriters (investment banks) who help set the offering price, conduct a 'roadshow' to institutional investors, and allocate shares. The company raises primary capital (new shares sold to the public) and existing shareholders may sell secondary shares in the offering.
Alternatives to the traditional IPO include direct listings (company lists existing shares without raising new capital) and SPACs (Special Purpose Acquisition Companies that merge with the private company to go public).
In Practice
A VC-backed software company reaches $200M ARR and files an S-1 with the SEC. After a two-week roadshow pitching to institutional investors, it prices its IPO at $25/share, raising $500M in primary proceeds. The stock pops 40% on day one, creating liquidity for early employees and investors.
Why It Matters
The IPO is the ultimate liquidity milestone for most VC-backed startups and represents the moment all the paper gains on cap tables become real money. For employees holding options or RSUs, it's when equity compensation transforms into actual wealth. However, IPOs come with significant new obligations: quarterly reporting, SEC scrutiny, and public market volatility.