synthetic exit

Definition

Restructuring that gives early investors and employees liquidity without selling the company, like a pressure release valve for cap table tension. An exit without the exit.

Example Usage

The company arranged a synthetic exit through a tender offer, letting early employees cash out 25% of their shares.

Origin

Venture capital liquidity terminology from the 2010s

Fun Fact

Companies like Stripe have used synthetic exits to prevent employee departures driven by paper wealth frustration.

Source: Venture capital liquidity event terminology

Related Terms

Advanced

synthetic equity

Stock-like compensation arrangements that mimic equity ownership without actually granting shares, often used to avoid dilution or regulatory complications. All the incentive alignment with bonus legal complexity.

🚀 Startup / VC

Beginner

hot deal

A startup fundraising round with overwhelming investor demand, usually led by a top-tier firm with multiple others fighting for allocation. The velvet rope nightclub of venture capital.

🚀 Startup / VC

Beginner

Series A, B, C

Sequential institutional funding rounds designated by letters, theoretically indicating maturity but practically just measuring how much money you've convinced people to give you. The alphabet of ambition.

🚀 Startup / VC

Intermediate

flat round

A financing round raised at the same valuation as the previous round, suggesting a company has neither advanced nor declined—essentially treading water while burning cash. More diplomatically acceptable than a down round but almost as concerning to investors.

🚀 Startup / VC

Intermediate

information rights

Contractual provisions granting investors access to a startup's financial statements, board minutes, and other operational data. Essentially, the legal right to know how badly founders are spending their money.

🚀 Startup / VC

Intermediate

churning

The unethical practice where brokers excessively trade in a client's account primarily to generate commissions rather than profits, essentially treating your portfolio like a butter-making operation. In SaaS, it refers to the rate at which customers cancel their subscriptions, making it the metric that haunts every startup founder's dreams. Either way, it's excessive activity that benefits someone other than you.

🚀 Startup / VC

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