When asked about an exit strategy, my favorite response is that we don’t have an exit strategy — we’re building the company to be successful over the long-term and aren’t building it to sell. Of course, if someone comes by and offers a number that’s too good to be true, naturally we’d look at selling the business. Now, some investors will want a more detailed discussion of an exit strategy, so it’s important to have a plan when raising money. Here are some thoughts on an exit strategy discussion:
- Pick five transactions in the same or similar space that have happened in the past 24 months and be prepared to talk about the financials for each (e.g. revenue, profitability, number of employees, value at time of exit, etc)
- Choose five likely acquirers and explain why they’d pay a strategic multiple to acquire the business
- Articulate the startup’s special sauce that makes it desirable (e.g. unique technology, great execution, amazing culture, etc)
Exit strategies are an important discussion topic when talking with investors that want to understand the perceived value of the business down the road. What else? What are some other thoughts on an exit strategy?