MONETIZATION

Monetization refers to the conversion of an investment into cash, which usually happens via a liquidity event. When investors, such as venture capital or private equity firms, invest in a private company, they expect to get their money back plus a specified return within a certain period of time. The investee may flow some cash out via dividends, but the primary way in which the investors realize their return is by monetizing their investment though a sale. Monetization can occur in several ways, but the more common ones include selling to or merging with another company, or taking the company public via an initial public offering (IPO).

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