Where the return actually gets realized
Every gain described in Lessons 17-21 is on paper until an exit converts it to cash LPs can actually receive. The overwhelming majority of venture exits, by count, are acquisitions (M&A); IPOs are rare, reserved almost exclusively for the largest outliers Lesson 21 was built around, and are correspondingly the source of most of a fund's largest single returns when they happen.
| M&A | IPO | |
|---|---|---|
| Frequency among venture exits | ~90%+ | <10%, concentrated in the largest outcomes |
| Typical timeline | 2-6 months | 6-18 months of preparation |
| Cost | Lower; legal and banking fees | Much higher; underwriting, ongoing public-company compliance |
| Founder/investor control | Negotiated directly with one buyer | Subject to public market pricing and sentiment |
| Liquidity timing | Often immediate or near-immediate at close | Typically delayed 90-180 days by an IPO lock-up period |
Why the choice isn't purely the fund's to make
Founders, employees, and the board (Lesson 19) all have a say, and their incentives don't always align perfectly with a fund's own preference. A fund nearing the end of its 10-year life (Lesson 25) may prefer a faster M&A exit for liquidity, while a founder convinced the company can become far larger may push to stay private longer and aim for an IPO instead, a real tension worth naming rather than assuming away.
Most fund returns come from good M&A exits happening reliably. The rare IPO is what makes the power law's top bucket possible.
Checkpoint
- M&A is far more common, faster, and cheaper; IPO is rare and reserved for the largest outcomes.
- An IPO's lock-up period delays actual liquidity by several months after the exit is technically complete.
- Fund life, founder ambition, and board dynamics can all pull the exit decision in different directions.
If anything here still feels unclear, ask before moving to Lesson 33.