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Startup Exit Strategy: Plan for the Unexpected Term Sheet

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Michel Courtoy
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Re: Startup Exit Strategy
Michel Courtoy   12/9/2014 12:29:21 PM
Divakar - Thanks for the input.  Yes indeed taking on outside capital almost automatically means that within 10-12 years there will be pressure for the investors to cash out.  A buy-out of the investors by the founding/management team is rarely seen but that does not mean that it is not a possible scenario.  More frequent is the buy-out of the original investors by a 'secondary' fund - i.e. funds that purchase assets from VCs, usually for ~20c on the dollar and will then attempt to sell the company in 2-3 years.  Of course, this not change the economics much for the founders, it only delays the outcome slightly.

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Re: Startup Exit Strategy
docdivakar   12/9/2014 2:35:23 AM
I wish the title of the article read "Startup Sustaining Strategy..." but then again I am dreaming! Once founders take on outside investors' funding, exits are inevitable, glorious ones as well as most often inglorious ones! But my point on "sustaining" is still valid, albeit for the intervening period where the founders and the team can focus on their mission with lesser financing pressure. Ideally, if the startups can turn cashflow positive and the termsheets permit, they could even buy out the outside investor's equity. But I regress back to my reality here, a majority of startups are not Ubers or the like where the investors are knocking on the doors and the termsheets are in startup's favor!

MP Divakar

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