An Exit Strategy is a planned approach for founders and investors to sell their ownership in a company and realize returns on their investment. Having a clear exit strategy is important for attracting investors and aligning long-term goals.
Types of Exit Strategies
| Exit Type |
Description |
Typical Timeline |
| Strategic Acquisition |
Sold to larger company in same industry |
5-10 years |
| Financial Acquisition |
Sold to PE firm or investment group |
5-10 years |
| IPO |
Initial Public Offering - list on stock exchange |
8-12+ years |
| Secondary Sale |
Sell shares to new investors |
Variable |
| Management Buyout |
Company management buys the business |
Variable |
| Liquidation |
Sell assets and close business |
As needed |
Strategic vs Financial Buyers
| Factor |
Strategic Buyer |
Financial Buyer |
| Motivation |
Synergies, market expansion, technology |
Financial returns, ROI |
| Typical Premium |
Higher (20-50%+) |
Market-based valuation |
| Post-Acquisition |
Integrate into parent company |
Grow and resell (typically 3-7 years) |
| Examples |
Google, Microsoft, Facebook |
KKR, Sequoia Capital, Blackstone |
IPO Considerations
- Requirements: Size, profitability/growth, governance standards
- Indian Exchanges: BSE, NSE (Mainboard), SME platforms
- Process: 6-12 months of preparation and regulatory filings
- Lock-up Period: Founders and early investors typically locked for 6-12 months post-IPO
- Ongoing Costs: Compliance, reporting, investor relations
Preparing for Exit
- Maintain clean financial records and corporate governance
- Protect intellectual property
- Build strong management team (reduce key person dependency)
- Standardize processes and documentation
- Resolve any legal or compliance issues
- Understand your market position and value drivers
Exit Multiples by Industry
| Industry |
Revenue Multiple |
EBITDA Multiple |
| SaaS |
5-15x ARR |
15-30x |
| E-commerce |
0.5-3x |
8-15x |
| Fintech |
5-15x |
15-25x |
| Marketplace |
2-8x GMV |
10-20x |