Why Start-ups need to think beyond Exit Strategies
When pitching to investors, I recommend Start-up founders focus more on explaining their “big opportunity by Year 5” i.e what’s achievable within first 5 years, rather than trying explain what your “exit” strategy might be within 5 years. That “big opportunity” could be conveyed in terms of market share, # customers, Annual Revenue, EBITDA….take your pick depending on your business/industry/circumstances.
It demonstrates a much grander ambition than just looking to be an attractive take-over target for an industry incumbent.
Founders also should convey where they think their business will be in 12, 36 and 60 months from now. If you can then articulate their Yrs 1,3,5 milestones with measurable goals/deliverables, that would be ideal because it shows you have a pathway to success (and to investors that you have clarity on what you need to achieve in the short and medium term).
Also, keep in mind that increasingly, we operate in a VUCA (volatile + uncertain + complex + ambiguous) world, where technology, social trends, rules/regulations etc are changing at a fast and furious pace. Rather than pitching about how your business is “built to last” try explaining how your business can achieve the following 2 metrics in the long run:
Market/opportunity attractiveness (are you operating in an industry that is fast growing, high potential etc? and will it continue that way for a long time?)
Ability to compete (how is your offering better than your competitors and can you maintain your advantage in the long run?)
Your pitch will be much more attractive to investors if you can demonstrate how “resilient” you business can be while operating in this VUCA environment. Are there multiple sources of revenue that your business can pursue and are these multiple revenue streams attractive enough (opportunity size large enough) and attainable (achievable in a reasonable time frame).
Hopefully the above thoughts give you more clarity as you think about your pitch and articulate your start-up’s Story.
