Remove the ‘exit strategy’ slide from your pitch deck.
You don’t know the future, nor what your investor’s ideas are. Remove it, don’t mention it in your pitch, and if asked, there’s only one right answer…
Running a startup is excruciatingly hard, and most founders I work with keep their eyes on the prize in an effort to stay motivated. One of the ‘prizes’ in question is the Big Pay Day — a liquidation event that turns the potential value of shares into real value, with a dollar figure attached. In most cases, that’s an acquisition or an initial public offering (IPO).
Whatever you do for motivation is your business — you don’t have to include it in your pitch deck. Remember that institutional investors do this for a living. They think about investments and the long-term plans for startups thirty times per day. It’s extremely unlikely that you’re able to add something to that line of thinking — they’ve thought of potential exits for your startup as soon as they’ve seen the cover slide. And more ideas will come up as you go through your pitch.
You are going to be wrong. And if you are somehow proven right, you were probably right for the wrong reasons.
If you do include an exit slide, the best-case scenario is that you’ll have thought of all the same things as they have. The worst-case scenario is that you’re introducing exit scenarios that don’t make sense to the VC, for reasons you don’t have visibility into. And now, you’re on the back foot, yielding time to talking about a subject you’re not an expert on, that ultimately doesn’t matter. It’s a no-win situation.
The truth is; you don’t know. Your exit is probably 5–10 years away. In that decade, you will learn more about your market than you’ll ever imagine. Competitors will appear, incumbents will shift, and whole universes (metaphorically speaking) will boil off into space.
In short: It’s futile to even speculate. You are going to be wrong. And if you are somehow right — i.e. you were able to call what your exit was five years before it happened — you were probably right for the wrong reasons.
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The other thing to keep in mind is that exit strategy thinking sends the wrong signal: One of the ways that VCs lose money is companies exiting too early. A lot of focus on a potential exit strategy shows the investors that the founders might take a deal too early, which might make the founders wealthy but doesn’t fit into the firm’s investment thesis. Take it off the table. Don’t mention it in the first meeting.
So what do you say when pushed on your exit strategy?
“I am building a company for the ages. We are planning for an IPO in seven years or less, and if other opportunities come up before then, we will discuss it with our board.”
That simple statement shows a few things: You are in it for the long haul. You’re prepared to keep slogging along to build a valuable company. And you know that there’s a dynamic in place: Your board (and, by extension, your investors) get a say in any exit conversations.
Haje is a pitch coach based in Silicon Valley, working with founders from all over the world to create the right starting point for productive conversations with investors — from a compelling narrative to a perfect pitch. You can find out more at Haje.me. You can also find Haje on Twitter and LinkedIn.