B Hari

March 18, 2021

The joy and sorrow of exits

Exits are milestone events for investors in startups. Liquidity events are not something which are frequent nor can be predicted in the startup world. For a lead investor in any Angel group , it is a matter of great joy to share the news of an exit offer with investors who co-invested .

As a lead investor , I have had the opportunity several times to provide exits to investors in deals that I have led . I shared one such offer today  with my investor group.  The news was received positively , but investors were divided - Full Exit , Part Exit , No Exit . A date and time to discuss and arrive at a decision now needs to be finalised .

Matured investor groups just follow the decision of the leads, since the leads have a slightly better understanding of the ground reality. However , it becomes extremely complex when the offer is for a full exit at a price which is at a deep discount to the current valuation.  Normally leads run a process to understand what the majority of the investor group wants in such situation.

In another instance , the founder had made a special request to me that he wanted our entire investor group to exit since he found it difficult to handle the investment team and their high handedness in providing documentation support to the company. Knowing fully well that we will be missing out on another surge in valuation , I did convince my investor group to fully exit from the startup . The startup is doing extremely well and its valuation has surged several times and they have done another two rounds since our exit.

In another instance , an exit offer was received when the startup raised their Series A , some of the investors in the Angel round did not exit and some did part exit . The startup ultimately failed and most investors who did not exit regretted their decision.

The lead investor's role is quite challenging . One needs to navigate very challenging situations  with founders , co-investors and other supporting teams. Your performance is as good as the last deal where you provided a good exit.

Take care.


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