Startup Espresso -- How to Achieve an Exit for Investors
Hello, this is Hall T. Martin with the Startup Espresso -- your daily shot of startup funding and investing. Today, we\u2019ll talk about how to achieve an exit in a startup investment. It\u2019s easy to get into a startup investment, but difficult to get out -- especially with a positive return. Most startup exits come when they sell the business to another company or go public on the stock exchange. It takes seven to ten years to achieve an exit in most cases. Most investors let the startup define the exit.\xa0 If they do, that\u2019s great. If they don\u2019t, then you define an exit for your investment.\xa0\xa0 I recommend using a convertible note that has a 3X in 3 year redemption right at investor sole discretion.\xa0 This provides you the option of exiting at the 3-year mark, or staying in for the long haul. By year 3 it becomes clear where the startup is headed.\xa0 They are either on the venture path to larger returns, or they have left the venture path and moved into payroll mode.\xa0\xa0 The problem with leaving the venture path is that most terms sheets give the investor an equity stake.\xa0 If the company leaves the venture path and turns into a lifestyle business, then the equity is going to be worth, at most, a small return typically around the 10-year mark.\xa0 Define the exit you want and make an offer.\xa0 Not all startups will take it, but many will. Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding. Let\u2019s go startup something today. For more episodes from Investor Connect, please visit the site at: Check out our other podcasts here: For Investors check out: For Startups check out: For eGuides check out: For upcoming Events, check out For Feedback please contact info@tencapital.group