Should an entrepreneur consider engaging with the world of VC, they need to include an exit strategy in the early days of their startup. Remember, the type of company, including its market, that you want to create will ultimately shape your exit strategy. While venture capital can be a viable option, it’s far from the only one. In this paper, we’ll explore what it truly means to accept funding from a venture capital firm and how to prepare for the exit ahead.

The VC Mindset on Exits

Bringing a venture capitalist on board can sometimes feel like a dream come true for entrepreneurs. However, if you’re banking on selling your company in 2–3 years for a massive payday, you might want to reconsider. The truth is, venture capitalists are not just investors; they’re partners with a focus on high returns, typically within 7–10 years. They want to see substantial growth and a significant exit — something that rarely happens in just a couple of years.

VCs represent their investors, known as Limited Partners, who expect a solid return on their investment within 10–12 years on the entire fund’s portfolio, not just one company. This means the fund is under pressure to deliver strong financial performance. VCs must work on creating the best compromise between value creation and exit probability, whereby the optimal point is rarely in the first 2–3 years post-VC investment. There are always exceptions to this long-term approach, be it a fantastic asset being acquired early or reconsidering the exit timeline for a struggling company, sometimes it can be more strategic to pivot towards more modest early liquidity. When considering value creation, this general long-term mindset is key even when looking at shorter-term defensive and offensive exit routes. If you’re interested in learning more about how funds define and measure performance, check out this article where we share the performance of our first fund .