Why social entrepreneurs need to think about exits

March 13, 2012 Posted by Unitus Seed Fund, Update

As a startup entrepreneur, you are mostly thinking about how to survive and getting to the next milestone next week or next month. And then an investor inevitably asks you, “what are your most likely exit opportunities?”

Your first thought is “why the heck is that even close to a relevant question for me to think about right now?” It feels so far away … kind of like asking you what you’re going to do when you retire. Not something you’re spending a lot of time thinking about.

Most investors answer to other investors

Except for a few investors who are investing their own personal money, almost all institutional investors have a contractual obligation to return cash to the investors who’ve invested in their fund. They’ve typically committed to return investor money within a certain timeframe and to achieve certain financial return results for the fund. Since most funds are investing in multiple businesses, they have the added complication of needing to estimate exit timings of their various investments to meet an overall objective. Similarly, they are needing to reach a blended targeted financial return across their portfolio.

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