An exit refers to a liquidity event through which investors can convert their equity holdings into cash or publicly tradable shares.
Common exit mechanisms include:
Acquisition by a larger company
Merger
Initial Public Offering (IPO)
Returns are realized only at the point of exit. Until then, reported valuations are indicative and not equivalent to realized gains.
Because exits are uncertain in timing and outcome, investors must treat startup equity as long-duration capital with uncertain liquidity.