Talking about an exit strategy when a company is still in the seed stage always seems a little hasty, if not pompous. However, since VCs and other investors are constantly thinking about exit strategies, it's crucial to develop a strategy around the subject, even if those strategies change as your startup expands.

When an owner decides to no longer be involved with a company, this is known as an exit. The owner's ownership interest in the business is typically sold along with such an exit, but this is not a requirement. For instance, a business owner could retain equity while hiring a management team to run the company. The shareholder may make a profit or a loss depending on the circumstances surrounding the exit. This article gives a general overview of the different types of exits available to entrepreneurs and discusses when you should think about one.

Starting an exit strategy early on in the life of the company is frequently beneficial. Early planning will assist founders in structuring their company to achieve their desired outcome, whether the goal is to have an IPO, be quickly acquired by Google, or pass the family business to the next generation.

The legal structure of your company, the kinds of revenue models you should use, the trade-offs between investing for long-term growth and short-term growth, the kinds of investors you should look for, and other factors can all be impacted by your exit strategy. Planning ahead for the exit is beneficial whether you leave the company due to burnout, business failure, or boredom. Entrepreneurs can maximize their take-home return on their investment and sweat equity by logically considering various exit strategies from the beginning.

Investors only genuinely consider planning for an immediate exit when they ask about your exit strategy as a way to evaluate your abilities as a founder. Market participants inquire about exit strategy for the following reasons:

◦ They want to determine how committed you are to developing the company and achieving a significant, investable business vision.

◦ They want to know how adaptable you are and how you can weigh various circumstances in terms of risk and reward.

◦ To determine your capacity for imagining various scenarios and your understanding of the business environment in which you are operating, they ask if you have considered potential exit scenarios.

Early-stage entrepreneurs should think about the following when talking with investors about their exit strategy:

1- Don't disclose to investors that you intend to be bought out by a sizable, well-known corporation. Exits are an outcome, not a strategy, in reality. Acquisitions by large corporations frequently depend more on timing and good luck than they do on the founder's careful planning. Use Google as an illustration. When a startup presents itself as an opportunity to fill a critical technology gap and has the potential to grow quickly with the resources that a company like Google can offer, companies like Google will make acquisitions.

2- Don't go overboard when discussing your exit strategy. When founders discuss their exit strategy, it gives the impression that they are anticipating future events, which irritates some investors. It's best to keep your startup's vision in mind in these kinds of circumstances, and keep your exit strategy ready in case the subject is raised.

3- If you have had discussions with corp dev teams, don't bring them up again. Early-stage founders should probably avoid communicating with corp dev teams at all costs. When you are actively trying to leave, that is the time to start these conversations. They will question why you aren't concentrating on developing your product or acquiring new customers if you tell prospective investors that you are actively speaking to corp dev teams. Additionally, it's a sign that you aren't confident in your ability to grow the business into something outstanding.