"What's your exit strategy?" It's a fairly common question that might come up in a pitch and it's one that I have seen a lot of founders trip over. Although this question typically only comes up if investors have some initial interest, it's still not a great look to fall flat on your face on a question even if you have answered the others well. Let's take a look at the best way to answer this question and some mistakes to avoid.
It's Ok to Play Defense
It's normally a good strategy to be proactive and cut off common questions that might come up before they are asked. It state it bluntly, this is not the case with exit strategy. NEVER proactively put an exit strategy slide in your pitch deck and bring it up unprompted. If you have an early stage company looking to raise money for the first time, then you don't know what the next 3-5 WEEKS will look like much less the next 3-5 years. Speculating on exit opportunities in half a decade is silly, don't do it. You need to convince investors that you are committed to all the ups and downs that come with running a startup and talking about exits is just not a good way to signal that. It's ok to play defense on this, let investors ask this question, don't bring it up first.
Deflect! - Cutting the Exit Strategy Off at the Knee
So you might be wondering, if an investor does ask me about exit strategy, how should I handle it? In my opinion the best way to handle this question is to deflect it. "We will cross that bridge when we come to it, but right now I am focused on growing this into something special" would be my preferred answer. You aren't being rude, but you are asserting you're commitment to the business and showing that you are focused on the most important things first. It should completely shut follow up questions off, but if you really pushed I would fall back on something like "There are a number of incumbents and disruptors I discussed in this pitch that might be viable acquirers, but it's too early to speculate on exactly which one at this point". Again, shut these questions down, they are frankly pretty worthless. If you have a good business in a good market, then liquidity will be the easy part.
Summary
An exit strategy is something that should be in the way way back of your mind when pitching your business. Please never ever put an exit strategy slide in your deck and bring it up on your own. If you do get asked a question about exit strategy, deflect it. You need to focus on the most important things and exit strategy isn't one of them. If you need help with your pitch deck and what slides to include, please reach out to us at InfleXion Point. We are happy to help!
Comments