Hello founders! I hope you’re wrapping up the year with some well-deserved rest and reflection.
Today, we’re diving into Founder Exit Strategies. If this isn’t on your radar yet — listen up! Your exit isn’t just about financial gain. It’s about preserving your company’s legacy, rewarding investors, and positioning yourself for your next venture. Early planning lets you control the process and maximize the value of your exit.
Here’s what we’ll cover:
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STEP ONE
Popular Exit Options to Consider
🤔 What to consider
Startups have several exit paths, and the best option depends on your ownership, valuation, and long-term goals. Here are the top options:
1️⃣ Strategic Acquisition
In a strategic acquisition, a larger company buys your startup to integrate its products, services, or technologies into their operations. This is one of the most common and founder-favorable exit strategies.
Why founders love it
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Often the highest valuation — driven by strategic value.
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Resources for scaling and preserving legacy.
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Potential for earn-outs or advisory roles.
Challenges
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Cultural and vision alignment is crucial.
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Founders and/or key employees may need to stay on for a transition period.
2️⃣ IPO (Initial Public Offering)
An IPO involves selling shares of the company to the public on a stock exchange, providing liquidity for founders, employees, and investors.
Why founders love it
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High returns and prestige if the company is successful in the public market.
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Access to ongoing capital through equity sales.
Challenges
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Costly, time-consuming, and heavily regulated.
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Loss of control to shareholders and the board.
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Company’s valuation and stock performance are tied to market volatility.
3️⃣ Private Equity (PE) Buyout
Private equity firms acquire a controlling or significant stake in your startup, often to streamline operations and increase profitability.
Why founders love it
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Provides a clean exit with potential for minority stake retention.
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Less public-facing & quicker than an IPO.
Challenges
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Focus on maximizing returns may shift company culture.
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Founders might need to stay on temporarily for a transitional period.
4️⃣ Venture Capital (VC) Buyout
In this scenario, an existing VC investor (or a new one) buys out the equity of the founders or early-stage investors.
Why founders love it
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Provides liquidity without requiring an outright sale of the company.
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Can offer a second wind to the company if the VC brings additional resources and expertise.
Challenges
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Founders might lose control if the VC demands a majority stake.
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The buyout valuation might not be as high as other exit options.
5️⃣ Executive Investor Sale
Selling to an individual investor or executive who is interested in running or owning the business.
Why founders love it
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Often provides flexibility for founders to step away while preserving the company’s vision.
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Can be quicker and less complex than selling to a corporation or going public.
Challenges
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Valuations might not be as high as a strategic acquisition or IPO.
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The company’s growth trajectory may depend heavily on the new owner’s abilities.
6️⃣ Secondary Sale
In a secondary sale, the founder sells a portion of their shares directly to another investor, such as a VC or angel.
Why founders love it
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Provides liquidity without requiring a full exit.
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Enables the founder to maintain operational control and participate in future growth.
Challenges
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Only feasible if the startup has significant investor interest or market traction.
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The valuation might be lower than a full exit.
7️⃣ Management Buyout (MBO)
The startup’s management team purchases the company, often with financial backing from investors or lenders.
Why founders love it
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Can ensure continuity of the company’s vision and operations with the right buyer.
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Provides liquidity while keeping the company within trusted hands.
Challenges
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Financing an MBO can be challenging and might result in a lower valuation.
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Founders often have to assist in securing funding for the deal.
STEP TWO
Which Exit Option is Most Favorable to Founders?
🚀 Top three founder-friendly exits
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Strategic Acquisition – Highest valuation, resources, and legacy preservation.
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Secondary Sale/VC Buyout – Liquidity with continued involvement.
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IPO – Lucrative but complex. Best for founders seeking growth and visibility.
STEP THREE
Plan Your Exit Early
A clear exit strategy demonstrates that you’re serious about scaling your business with purpose. Even if you’re a small business owner or solopreneur, having an exit strategy helps ensure you are prepared for the future.
🚪 When to exit
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Facing financial distress.
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Ready for new ventures.
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Growth surpasses your leadership.
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Inbound offers align with your vision.
👩💼 Professional help is key
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For deals over $10M, hire an investment banker (not just a broker).
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Legal advisors can help manage SEC regulations.
📉 Don’t forget ownership dilution
Each funding round affects your equity at exit. Plan accordingly.
🏛️ Decide your post-exit role
Most founders stay 12-18 months post-acquisition. Define your role upfront.
PREMIUM SUBSCRIBERS
Need Additional Help on Exit Strategy?
Hi wellness founders, it’s Erin here!
I’ll be sharing exclusive content on exit planning and execution for Premium Members. This includes:
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Essential Webinar Videos to help you start your business and build your business plan
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Excel & Financial Templates to budget, forecast and model your growth
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Custom worksheets and guides to support strategic planning and execution
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Pitch deck tools including ppt templates and resources to start scaling