What are the two primary exit strategies for venture capital firms?

Venture capital firms typically focus on two main exit strategies: going public through an initial public offering (IPO) or selling their stake in a portfolio company to a larger firm, often referred to as an acquisition.

When a venture capital-backed company goes public, it can generate substantial returns for investors by selling shares to the public. This allows the venture capital firm to liquidate its investment and realize gains based on the company's market valuation. An acquisition allows a larger firm to purchase the venture-backed company, providing an exit for the venture capitalists who can receive cash or stock in the acquiring company, thus also facilitating a profitable exit.

Both of these strategies are preferred in the venture capital industry because they provide a clear and often lucrative means of recovering invested capital and achieving a return on investment within a reasonable timeframe.