Eira Wexford
You know, when an angel investor backs a company, it’s not just about, like, good vibes and helping a cool idea grow. Seriously. They put their own hard-earned money in, right? And usually, they’re hoping to get, oh, a lot more than that back. That’s the whole point, actually. We call it an “exit strategy,” but what it really means is, how does an angel get their money out of the company, hopefully with a nice chunk of change on top? For 2025, it’s not much different than any other year, but the details, the market, they sure can make things twisty.
See, a lot of folks, they think about the startup journey: idea, funding, growth, maybe another funding round. But the exit? That’s the finish line for the angel. It’s what lets them do it all again, or, you know, just buy something nice. Without a way to get out, all that money is just stuck in a company that might be doing great but isn’t giving them cash. That’s not a good look for anyone’s bank account.
The Big Dreams and The Real Ways Out
So, what are these “ways out”? There are a few main paths, some are like hitting the lottery, others are more like a long, steady walk.
Getting Bought Out (M&A – Mergers and Acquisitions)
This is the big one most angels whisper about. Someone, usually a bigger company, comes along and buys the startup. Happens all the time. Or, well, it can happen. Maybe a huge tech giant wants the startup’s cool new AI widget, or a big consumer brand wants their subscription service. For angels, this is usually the best-case scenario. You sell your shares, get paid, often at a sweet premium.
The buying company, they’re looking for a few things: new tech, new customers, maybe a really smart team they can grab. They’ll do a super close check of everything, finances, legal stuff, you name it. It’s called due diligence, and it’s basically them poking every corner of the company. If everything checks out, bam! You could be looking at a nice wire transfer. What’s interesting is, in 2025, with all the talk about consolidation in certain tech sectors, M&A could actually see some interesting spikes. Or, you know, the opposite, if interest rates go wild again. Things can change so fast.
Going Public (IPO – Initial Public Offering)
Ever heard of a company going public? That’s an IPO. It means their shares start trading on a stock exchange like the Nasdaq or New York Stock Exchange. For a small startup that an angel invested in, this is, like, super rare. Super, super rare. It takes years and years of massive growth, a ton of money, and a company that’s ready for the whole world to scrutinize its books.
If it happens though, wow. It can mean huge returns. Angels get to sell their shares on the open market. But honestly, most angel-backed companies don’t ever get big enough for an IPO. It’s a moonshot. You shouldn’t really bet on it when you first put money into a startup. It’s more of a happy accident than a plan.
Selling Shares to Other Investors (Secondary Sales)
This is a pretty common one that doesn’t get all the headlines. Let’s say a startup is doing well, but maybe it’s not ready for an IPO, and no big company is buying it yet. A new, bigger investor – like a venture capital firm or a private equity group – comes along and puts money into the company. Sometimes, as part of that new money deal, existing shareholders (like angels) can sell some of their shares to this new investor.
It’s not often your whole stake, but it’s a way to get some cash out while the company keeps growing. This kind of exit is happening more and more, I believe. It provides liquidity without waiting for the absolute big bang exit. It’s a decent compromise. Like, not a home run, but a solid double. Sometimes, getting some money back is better than waiting for all or nothing.
The Company Buys You Out (Management Buyout or Share Repurchase)
Sometimes, the company itself, maybe the founders or the management team, decides they want to buy back shares from existing investors. This usually happens if the company is profitable and has some spare cash, or if the founders want to regain more control. It’s not usually the highest price you’d get compared to a big M&A, but it’s a way out. And, you know, sometimes it’s the only real option.
It can be a slow process, often done in stages. You might not get all your money at once. But hey, it beats a total loss, right? For an angel, this can be a quiet, dignified way to get an exit, especially if the company is growing steadily but isn’t a “unicorn” in the making.
The “Uh Oh” Exit (Liquidation or Write-off)
This is the one nobody talks about at parties. Sometimes, startups just don’t make it. They run out of money, can’t find more customers, or the idea just doesn’t work. When that happens, the company might liquidate. They sell off whatever assets they have – desks, computers, intellectual property if anyone wants it – and try to pay back creditors. Angels are usually at the very end of the line, if there’s anything left. Most times, there isn’t. So, yeah, you write off the investment. It’s a loss. It hurts, but it’s part of the game. Not every swing is a hit, you know?
When Does All This Happen? And Other Random Thoughts.
Timing is everything, they say. And with exits, it really is. A hot market might mean more buyers are out there, willing to pay more. A cold market? It could mean waiting a long, long time, or taking a much lower price. For 2025, the economy still feels a bit… squiggly. Interest rates, inflation, even the geopolitical stuff can mess with deal-making. Angels and founders need to be agile, watch the news, and be ready to jump if an opportunity pops up. Or, to be super patient.
And patience is often key. An angel usually waits 5 to 10 years, sometimes more, for an exit. It’s not like buying stocks today and selling tomorrow. This is long-haul stuff. And you gotta remember, a lot of the power in an exit lies with the founders and the board of directors. Angels usually have some say, especially if they have a decent chunk of equity or a board seat, but they aren’t driving the bus alone. You should be talking to the founders from day one about their exit thoughts. Not in a pushy way, but, like, understanding their vision for the future. Are they building to sell? Or to go public? Or to be a lifestyle business forever? That last one is generally not an angel’s jam.
I believe angels should always think about the exit before they even write the check. Seriously. Ask the founders: “What’s the dream exit for this company? Who would buy you? How big could it get?” If they can’t answer, or they say, “We haven’t thought about it,” that’s a bit of a red flag. Not a deal-breaker maybe, but something to keep in mind. Because putting money in is easy. Getting it out, that’s the trick.
Some people think about this whole process like a big, complicated puzzle. You gotta have all the pieces – a good company, a good team, good market conditions, and a clear path to getting your money back. And sometimes, you put all the pieces together, and it’s still not a pretty picture. That’s just how it goes sometimes. Investing in startups isn’t for the faint of heart, that’s for sure. But when it works out? Man, it’s a rush.
Frequently Asked Questions About Business Angel Exit Strategies
Okay, so you’ve got questions, I got… some answers.
1. How long does an angel investor usually wait for an exit?
Well, it’s not a quick thing. Typically, an angel waits between five and ten years, or even longer, for a company to reach a point where an exit becomes possible. It really depends on the industry, the company’s growth, and general market conditions. Sometimes, quicker exits happen, but they’re not the norm. And, you know, sometimes it just… never happens in the way you hoped.
2. What’s the most common type of exit for angel-backed companies?
From my experience, the most common exit for an angel investor is usually through an acquisition by a larger company. IPOs are super rare for these smaller, early-stage companies. Selling shares to later-stage investors (secondary sales) is also getting pretty common, offering a partial exit. Liquidation, unfortunately, also happens more than anyone likes to admit.
3. Can an angel force a company to exit?
Generally, no. Angels, especially if they’re a small part of a larger investor group, don’t usually have the power to force an exit. The decision to sell or go public is typically made by the company’s board of directors, often with a lot of input from the founders. Angels can influence, offer advice, and push for a strategy, especially if they have significant ownership or a board seat, but they aren’t the sole decision-makers.
4. What happens to an angel’s investment if the company fails?
If a company fails and has to shut down or liquidate, angels usually lose their entire investment. Any remaining assets are typically used to pay off creditors first (like banks or suppliers). Shareholders, including angels, are usually last in line, and there’s often nothing left by then. It’s a risk all early-stage investors understand they’re taking.
5. How can angels best prepare for an exit from the start?
Being ready for an exit means a few things from day one. Angels should talk openly with founders about their long-term vision for the company and potential exit paths. Having clear terms in the investment agreement about future sales or liquidity events can help. Staying involved, offering good advice, and supporting the company’s growth are also key. The better the company performs, the more attractive it becomes as an exit target. And good relationships with the founders? That’s golden, always.
