Dear SaaStr: What Factors Do Investors Consider When Deciding to Exit a Startup?
Investors rarely get to choose. Founders and the CEO make the decision to exit. VCs have surprisingly little “power” here … unless the start-up is running out of money. Then, the founders are dependent on more funding from the VCs. But otherwise, really all VCs have is a vote.
Beyond that though .. what makes VCs want to exit a start-up?
It’s when they don’t see a brighter future.
VCs naturally want to double down, push harder, go longer. A $2B exit is so much better than a $1B one, and the chance of a $1B exit later is much more exciting than a $100m exit today.
So if you’re growing, and doing well, VCs generally speaking won’t want you to sell.
But … but … if it looks like you won’t get to the next level, VCs will be fine selling. And if you are tight on cash, they likely will start to encourage you to sell.
Because they won’t want to write another check.
A deep dive in this convo with Dave Kellogg:
