Must reading on the “exit strategy question”

• They want to gauge your level of commitment to building the business
• They want to understand your level of flexibility
• They want to know if you have thought about possible exit scenarios

What he doesn’t say is something I often coach founders about: you know you have engaged a investor’s interest when he or she starts telling you about other markets your product could dominate in. Similarly if/when an investor starts telling you about companies would make great acquirers you have probably engaged their interest as well. Always better if your customer (the investor) comes up with the good idea than you (the seller).

Patrick Henry provides a near perfect response that you should recraft in your own words. But I won’t steal his thunder by quoting it here. Read his article on Inc.com.

I will add that like other questions from investors, try to turn the session from an investor/founder interrogatory into a discussion. The simplest way to do this is to ask some questions on your own such as:

• What would you see as our best exit strategy?
• Tell us about some of the exits of the companies you invested in? Which ones were you most satisfied with?
• Any exits that have surprised you lately?
• Have any companies in our market exited recently? Tell us about them.
• Assuming our most likely exit is an acquisition, what do you think we need to do to be an attractive acquisition target?

And then turn the discussion away from exits and to the most important question at hand: How much is the investor  interested in putting into your company?