The path for a company that receives venture funding is well established. After incorporation, it receives a few rounds of VC funding to help it grow rapidly, then once it has reached a certain size, or market conditions are favourable, the company either exits by an IPO or a trade sale. In either of those cases, the VC firms that invested in the fledgling company before it became a major player, hopefully receive a substantial return on their investment. Of course, this is a simplistic view, with a myriad of other factors influencing a company’s development, but the end game is always the same for the VC – it get its investment back (and hopefully a lot more) when the company exits.

But just how much investment does it take for a company to IPO or have a trade sale? Are there differences in the amount invested for either of these outcomes? And are there any differences for companies that are in particular sectors?

To explore this further, we used our Library House database of venture-funded companies to calculate the average external investment received per company before it exits via a trade sale, or an IPO. We also looked at how some individual sectors differed, including Life Sciences, Cleantech and Mediatech.

Overall companies that exited by IPO received about 54% more investment than for those that exited via a trade sale. In some cases this could simply be because companies that exit via IPO successfully are generally larger than those exiting via a trade sale, hence requiring more investment to fuel their growth to reach this stage. Furthermore, companies exiting via trade sale can be purchased at an early stage of their development, to acquire their technology or personnel, rather than for the actual company per-se. This is particularly true of the software sector, where this approach has been pioneered by companies such as Google and Oracle.


Life Sciences and Mediatech companies follow the trend in requiring more investment if they exit via an IPO than by a trade sale, with Life Sciences companies requiring 31.5% more investment to exit via IPO, and Mediatech companies, 38% more investment. In Cleantech however, companies that exited via trade sale have received 39% more investment than those that exited via an IPO. This could be because incumbents are more cautious about buying earlier stage companies in this fledgling sector, instead waiting until the technology has been commercially proven. Another partial explanation is that some Cleantech companies seek early IPOs on AIM, as a means to generate capital to further technology commercialisation, rather than seeking continued rounds of venture funding.

Whilst trade sales are becoming an ever more common exit route, it remains that large IPOs are extremely important for a sector, increasing the number of players and helping drive innovation, competition and growth. This has positive impacts for both the sector, and the economy in general suggesting that holding a steady course to IPO should be encouraged. Without IPOs, companies such as Google, Apple and Yahoo! would never have become the powerhouses that they are today.