Should Our Startup Have an Exit Strategy? Should We Tell Potential Investors What It Is?
Some investors want to stay investors in portfolio startups for the whole life of the company, others are looking for a quicker return on an investment and will be happy to accept a smaller return along with that.
You can get penalised by either kind of an investor if you raise the topic of an exit strategy without being asked.
If in your pitch to a long-term investor you mention an exit strategy, you might not seem ambitious enough or long-term enough to them.
When pitching to a short-term investor they may have their own ideas about what your exit strategy should be, and it might be quite different to theirs. No prizes for guessing whose plan they’d prefer.
What investors might think is an important consideration but also important is what you, your cofounders and any existing major shareholders think.
If the exit opportunity is a private sale rather than an IPO, the offer to buy your company may not allow you much time to get all your ducks in a row with cofounders and major shareholders.
The weaker your company (and hence the more you’ll want to be acquired) the less time you’re likely to have to accept/negotiate the sale. Offers to acquire sometimes expire before…
