Chapter 7 - Start Up Exits
IN THIS LESSON
Your VC and Angel Investors Will Always Need Some Kind of Out
Time flies when you are growing a business. The years can pass quickly. Always looming in the distance is the reality that VCs and your angel investors are expecting to exit your business and make a positive return on their investment.
After 8 or 10 years, you may want to plead with them, “Wait! Just give us a few more years.” But the pressure will be on for them to have a way out. They want to see a positive return and to use it in new ways to grow their wealth even more.
To assume that your investors will stay with you for decades is not realistic. You may be the nicest person. You may be a great visionary, articulating a compelling vision of the future with your company leading the way. A few may stick with you much longer than most, but, in general, VCs and angels need out.
To go even further, an exit is a must-have for a venture-funded company. They need a way to get cash from their investments in start-ups. Remember that VCs are investing with other people’s money. These professional investors are under a fiduciary responsibility to not only protect but also return their money at the end of the agreed lock-in period.
Here are three things to remember:
Don’t take it personally. It’s a business. A VC may have a timeline in mind, such as 7 years. You may develop a great relationship with the VC, but he has other obligations, too.
Keep up open communication with your investors. You can manage expectations with investors. You can give them more accurate views of timelines that it will take to accomplish things. You may be able to quell the nerves of nervous investors and make them stay for years to come, but the better your communication, the less surprised you’ll be.
Take the pressure off by simply accepting it. Okay, so investors need an out. No problem. If you make it part of your plan, then you will know from the start. You will not be blindsided.