Should I include an exit strategy as part of my pitch to angel investors?
In my first letter to Angel investors that describes my work should I include a description of my exit strategy? And if that is something I should include, what all should I include in describing my exit strategy other than time period and amount to be returned?
1 Answer
An exit strategy -- if you choose to include it -- is how the investor is going to get a return on their investment. The time period and amount would be sufficient if the proposed investment vehicle is a loan. It the investment vehicle is equity then the exit strategy would be if the goal was to go public, merge with a partners, be purchased by a competitor or something where the initial investors may have an opportunity to "cash out" on the increased value of the company.
The details of a potential exit strategy are certainly part of your investment overview, presentation and support material. Unless the exit strategy is part of the core value proposition of the business -- like you have a LOC from a purchaser if certain benchmarks are met -- I don't imagine it as part of an initial letters whose purpose it is to get an audience.
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To this response I would add this: go BIG or go home. An investor doesn't want to see someone who is looking for an out before they have received funding. Present to your investor how you plan to build value, and how that value will scale. I would think that provided you are successful at that, then an opportunity for an early exit will be certain, and an experienced investor will know that. – Byrne Reese 12 years ago
