With exits for tech startups rare, especially outside of the largest tech startup hub, most entrepreneurs anticipating a great exit are going to be disappointed unless they are on pace for $100 million in annual recurring revenue (ARR) or $5 million in earnings before interest, tax, depreciation and amortization (EBITDA). Why those numbers? $100M in ARR is often the requirement for a successful IPO and $5M in EBITDA is often the minimum to get private equity firms interested in buying the company.
Strategic buyers are often the most desirable buyer for startups as they’ll have both a complementary product or service that’s much larger and they’ll pay a much higher price, all things considered. Only, there are so few exits to strategics. In order to have options, the startup has to reach significant scale (> $100M ARR) or significant profitability (> $5M EBITDA). Most startups won’t achieve either and need to recognize the financial benchmarks required, especially in the context of fundraising.
Entrepreneurs would do well to think through what success looks like for them and plan accordingly when evaluating different funding opportunities for the company.
What else? What are some more thoughts on the $100M ARR and $5M EBITDA targets to have strong exit opportunities?
David Cummings on Startups 
In addition to these two benchmarks, entrepreneurs need to think through and expect negotiations around claw back conditions. Even when the $100M ARR or $5M EBITDA are achieved a clear path and trajectory above those marks must be credible and achievable for optimum payout to occur.