Venture Capital

Don’t Have an "Exit Strategy," but Do Have a "Competitive and Cooperative Landscape" Slide.

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Jason Lemkin

A small but important tip and point that merits a little time.

When you’re fundraising … people do need to know how the heck they are going to make money if they write you a check.

And really, there are two types of investors.  Those looking to “make money” — traditional angels and the like.  And those that are Unicorn Hunting.

One slide you can put in your investor deck that will just kill a discussion with Unicorn Hunters is an “Exit Strategy.” Because almost no matter what you put on that slide will make you look like someone not going for it, not really.  Putting Box up, at a $2 billion market cap as a “potential acquiror”?  Well, Box is great.  But it’s hard to imagine today at least they are going to part with more than 5%, maybe 10% at most, of their market cap to buy anyone.  That sort of puts a present-value cap on your exit there at $100m-$200m, tops.  Tops.

What does that say to a Unicorn Hunter?

And really … anyone in their right, rational mind will sell once they go from having not even two cents in the bank to millions.  So almost any “exit strategy” at all tells Unicorn Hunter VCs you’ll never build something big enough to make them really big money.

So “Exit Strategy” is a death slide.

But …

You still sort of want to do this. Just more subtly.

Because unless you have a very experienced investor in your vertical, in your space — and sometimes, yes you will — they may need help in order to see it all.

  • They’ll need help to see why this can be a Unicorn.
  • They’ll need help to see why you are really changing the world.
  • They’ll need help to see why your crappy little buggy software that barely does anything will be trusted by the Fortune 100.
  • They’ll need help seeing how you can ever get to $50m, $100m, $300m ARR.

and really …

  • They’ll need help seeing if their investment will ever be worth anything outside of an IPO.

So don’t have an “exit strategy” slide. That’s an F.  You’re building a Decacorn, after all.

But have a “competitive and cooperative landscape” slide that includes everyone with a valuation > $1.5 billion or so that could buy you.  Do more than just put your 2 little competitors today. Include the big guys and non-obvious candidates that could acquire you for big bucks — especially non-obvious big guys that only make sense once you understand the space.

That will help.  It will help all us investors dream with you, and see any number of great futures.  Both a Decacorn one and a back-up plan where you are “only” worth $100m or $200m or so. 🙂

Published on November 23, 2015
  • Hi Jason,

    Missed the link back here.. As I have read that post already, thought the link back will help many who have not.

    “They’ll need help seeing how you can ever get to $50m, $100m, $300m ARR. More on this here: SaaStr | Is $300m ARR the New $100m?”.

    Regards,
    Syed

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