When a VC-backed company achieves an exit, the media focuses on covering the exit value.
However, as important as the exit value is the amount of capital that was invested in the company until it achieved its exit. There’s a big difference between a company that exited for $100M after raising $5M and one that achieved the same exit value after raising $30M.
This difference in capital efficiency, together with other terms like liquidation preference multiples, anti-dilution clauses, and earnout provisions, can produce very different return distributions for the founders, team, and investors of two companies with the same headline exit valuation.
This effect is particularly pronounced in times when there’s plenty of venture capital which makes it relatively easy to raise large amounts and be less capital efficient. The current environment is a great example.