The exit route for a venture capital investment is least likely to be in the form of a(n):
C is correct. Leverage needed to finance a management buyout is not readily available to firms with limited history.
why can’t there be a buyout by the management, do not they already have experience in the business?
If the business has been around for only a few years, management likely won’t be able to find a bank that would finance the buyout. Banks like to see a long history of positive cash flow.
The solution is pretty clear here. It’s not a matter of experience. It’s a matter of capital. Management buyout is one of the four exit strategies for buyout investments in more mature companies. VC investments however, generally are in fledging companies.
what is the role of the bank in this scenario! As far as I understand it is the management of the venture capital who wants to buy the business.
A managed buyout is usually assisted by a bank or other PE firm… You think managers have that kind of money to buy out their firm, outright?
Also, its not the managers of the VC… its the managers of the investment (the company).
I believe Michael Dell had to raise quite a lot of money to take his company private again… he is loaded with $$$ 
Why is a business that’s been around for only a few years and has a short history of positive cash flow more likely to go public than be bought out by its management? Seems counterintuitive to me.
In the CFA curriculum, they stress the points that management buyouts require leverage and that VC companies generally have little (positive) cash flow. This is normally true in real life as well as managers are typically salaried and do not have the capital to acquire the company for which they work. The point of this question is that banks - the providers of leverage - are not willing to lend to a VC-type profile company with few hard assets and likely little cash flow. Ths is why they specify that it is a VC-backed company.