Tags: Submit Your Business PlanWhich Is The First Step Of The Writing Process For A Process EssayHurricane EssayCreative Writing Summer Camps UkMath Homework Help Free AnswersEssay Reality Shows Boon BaneBusiness Plan Dance Studio
This happens most often as people get older and want to finish their careers.More rarely, you’ll encounter younger entrepreneurs whose vision from the start was to establish a business, grow it fast to make it attractive to a purchaser, and sell. I’ve had personal experience with several variations on the classic exits.Detail needs to be provided on potential buyers outlining their track record of purchasing businesses.
I am often asked what text should be included in an investor ready business plan under the section ‘Exit Strategy’.
This is to answer the question for the investor, ‘How will we get our money back’.
And as a group, we all worry about deals that don’t seem to offer likely exits, and we worry just as much or more about investing in startups whose founders don’t seem to understand and acknowledge the need from the investor point of view.
Aside from the investor-oriented exit strategy, which is a factor in every outside investment, you’ll occasionally hear about a different kind of exit, when the startup founders, the entrepreneurs themselves, sell their company and turn their ownership in a business into money.
So startups looking for angel investors or venture capital (VC) absolutely need an exit strategy because investors require it. And the rest of us, starting, running, and growing a business, but not looking for outside investors, will probably need an exit eventually; but there’s probably no rush.
The exit strategy related to startup funding, is what happens when investors who had previously put money in a startup get money back, usually years later, for a lot more money than they initially spent.Having a minority share in a healthy, growing company, without any prospect of an exit, is a terrible scenario for investors.My own angel investment activities include more than one investment in companies that are still healthy, still growing, still have happy founders, but no good prospects for exits in the foreseeable future.Exit strategies related to startup funding are quite often misunderstood: The “exit” in exit strategy is for the money, not the startup founders or small business owners.The company brings in money and the investors get money out.My general view on Exit Strategy is that it is a very difficult issue to answer properly because it is very difficult to forsee the future and each investor will have their own interpretation of the ‘correct’ answer.But there are options open that must be analysed within the context of your business and industry so that a credible discussion can take place such that your potential investor has confidence in the abilities and ambition of your team.And that scenario, while it can be very good for the founders, is terrible for the investors.I’ve been a member of an angel investment group for more than six years now, and I’ve been involved in reviewing the possibilities (studying the possible deals, which we call “due diligence”) every year.For example, that’s what Crunchbase was talking about when it published The Average Successful Startup Raises M, Exits at 2.9M last December.And that’s what happened earlier this month when Linked In bought Newsle: deal terms weren’t announced but two venture capital firms had spent .6 million buying shares (investing in) Newsle, and unconfirmed reports have Linked In paying million, so we can assume the two VC firms had a happy exit pocketing a lot more than the original .6 million. Investor exits normally happen in only two ways: Either the startup gets acquired by a bigger company, for enough money to give the investors a return (as just happened with Newsle), or the startup grows and prospers enough to eventually register for selling shares of stock to the buying public over a public stock market, as happened with Facebook in 2012 and Twitter in 2013.