Chapter 10. The finish line: how to exit in the best possible way

The big exit is what founders work so hard for, it is the light at the end of the tunnel and the glory that shines like a diamond. Regardless of the stage of your startup, it is never too early to look ahead and know your options to exit.

What ‘exit’ means:

Owners sell ownership in a company to investors or another company. Often, it is when you, your team and investors get paid. The exit strategy you choose should align with your overall goals.

The 5 primary exit strategies:

Going public - Initial Public Offer (IPO). A founder's dream is usually to take the company public. If done right, it can make many people wealthy.

Acquisitions – This is when startups get bought by another company for more than 50% of the shares. Companies usually acquire startups because they want to gain new technologies, decrease competition, enter a new market, and/or gain market share quickly.

Acqui-hires – Technically, this is an acquisition, but the intent behind buying the company is to acquire talent instead. This happens often when employees of a company are particularly skilled or specialized. 

Milk the cow – Not every startup needs to sell. For companies that are bootstrapped with positive cash flow, some founders choose to keep the company and have steady monthly cash flow.

Bankruptcy – Close down is not always the way founders want to exit, but it is an option. When you run out of cash and don’t have the ability to pay back investors, you have no choice but to declare bankruptcy. 

If you prefer to sell your company, remember that “companies are bought, not sold.” Have your options open, network a lot and let the buyers come to you.

How long it takes to exit (IPO):

The time it takes for a startup to exit varies depending on the industry. According to Crunchbase, for firms historically going the IPO route, Saas companies took 9 years to exit, social media and marketplace companies took 7 years, gaming companies took 6 years, and e-commerce companies took 5 years, etc.

So exit times vary wildly. Exiting the business is a big decision, as a founder along with any large investors, you will need to develop the intuition on the timing and the right exit strategy to take for your business.

A CPA’s 2 Cents

No matter where your startup stands, it always helps to start thinking about your exit strategy early on. Align on your goals, know your options, and make the best choice for your employees, investors, and yourself.