<p>Leveraging the principal-agent theory, this study incorporates reputational capital into a continuous-time framework for analyzing venture capital exit decisions. The authors explore how the principal-agent relationships influence the decision to take capital public by synthesizing optimal incentive alignment and IPO timing within a unified model. The results uncover an intriguing aspect of reputational capital: Despite entrepreneurial efforts to augment this capital, its growth is not linear but tends to reach the highest level before the IPO event. Furthermore, the accumulation of reputational capital expedites the capital exit process and enhances the returns from such exits. Subsequently, as the exit timeline extends, the proportion of exit returns allocated to entrepreneurs escalates to a full share, imposing a constrained decision window for investors on exit timing. The findings suggest that the timing for maximizing investor returns at an IPO is later than the timing that maximizes company revenue. Moreover, excessive IPO costs further delay this exit decision for investors. These findings offer fresh insights into the languishing IPO market observed over the last two decades.</p>