When founders and investors talk about exits, we usually imagine things going well. The company grows, someone wants to buy it, and everyone gets a return they’re happy with.
We spend much less time asking what happens if the market turns, we can’t raise again, or the business simply doesn’t work out the way we hoped.
I understand why. It’s not a fun conversation. In a not-so-good exit, there may be little or no money to distribute, and the outcome can be disappointing for people who put a lot into the company. But avoiding the conversation doesn’t make it less important.
Where a company ends up affects more than the cap table. It can shape relationships with investors and co-founders, what happens to the team, and what the founder is able to do next. Those seem like good reasons to think through the possibilities before there are only a few months of runway left.
This isn’t about planning to fail. It’s about asking some practical questions while there’s still room to act. If a corporate could absorb the company or hire the team, which one would it be? Why would that be worthwhile for them? Even if they paid nothing for the business, taking on more people would increase their salary costs. The value of doing so needs to be clear.
Or perhaps merging with another startup makes more sense. If so, which startup would be a natural fit?
I don’t think every founder needs to have a complete answer from day one. But if you get to around six months of runway with no clear path to fundraising, some of your effort should probably go into figuring out who could absorb the company. Investors should help with that, too.
I’d like to think more about a simple framework for making these decisions, and learn from founders who have been through them. For now, my point is smaller: we should make space for the not-so-good exit in our planning. It may be uncomfortable, but the people affected by it deserve more than a last-minute conversation.