If you're developing a tech startup, planning your exit strategy should never be an afterthought. The most successful founders consider their exit strategy from the start and then treat exit preparation as an ongoing discipline. This means investing in and maintaining tight governance, robust data, and a value story designed to be appealing to likely buyers or the public markets.
This guide explains what an exit strategy is, why it matters, and how to get ready – so you can maximise the value you’ve built and avoid common pitfalls.
What is an exit strategy?
An exit strategy is a deliberate plan for how founders and investors will ultimately realise the value they’ve built in a business. Done well, an exit strategy will maximise that value in a way that works for everyone involved. Done badly, and it can undermine years of hard work.
A robust exit strategy defines how ownership will change hands – whether through a sale, merger, management buyout, or initial public offering (IPO) – and ensures that decisions made along the way are aligned with that endgame.
Exit planning isn’t just about the final event; it’s a continuous process that shapes how your company is governed, financed and positioned. A well-defined strategy helps founders stay focused on creating transferable value – building systems, data, and leadership structures that don’t depend solely on them. It also helps you to clarify what factors drive your company’s valuation and what potential buyers or public markets will find valuable and be willing to pay for. The best time to start thinking about an exit is long before you actually need one.
Why exit planning matters
Macroeconomic cycles, investor sentiment, and regulation will all influence when the right exit opportunity arises. All of those are outside your control so one thing remains constant: being prepared. The right exit, at the right time, rewards years of hard work and good governance.
Whether your goal is a trade sale, flotation, or secondary investment, the principle remains the same: plan early, stay ready, and build a business so well-run that others will want to own it. You can only sell if someone is willing to buy, so timing is key; and timing is part planning and part opportunism. You need to be ready to take the right opportunity when it comes.
It’s worth considering early whether an earn-out might be part of a deal. This typically means that some of the value (sale price) is realised over a period of time, usually dependent on the business achieving pre-agreed milestones and targets. But it also typically means the founder staying on while this process pans out, most often for one to two years. Earn-outs can bridge valuation gaps and align incentives, but they also shift risk to sellers and it can be hard for a founder to suddenly work for someone else.
Market conditions can change quickly. In recent years, the merger and acquisition (M&A) activity has fluctuated - influenced by a combination of interest rates, regulatory scrutiny, and broader sentiment around how quickly changes - such as new technology - might influence a specific market segment.
That’s why it’s important to have as many options as possible. Be equally prepared for a sale, an IPO, or private equity investment, rather than betting on a single path that could close unexpectedly as markets shift.
At the same time, clarity matters: consider potential exit strategies from the start, and never lose sight of the end goal. When the opportunity comes, be ready to take it. This can be as much about company preparedness and discipline as it is about being prepared mentally and emotionally to move on from the thing that has likely dominated your time and life for many years.
In short, a positive exit for a founder will depend on timing but also sustained readiness. Whether the goal is an IPO, a sale, or a secondary investment, the best-prepared companies build flexibility into their strategy. They understand that markets turn, valuations fluctuate, and windows close – but well-governed, transparent, and efficient businesses will always find a buyer.
When should you start planning an exit?
Earlier than you think. Much earlier.
Alignment often begins in the first pitch you make for investment as most investors will ask about plausible exit strategies and suitable buyers. They’ll likely have their own views on the merits of the various options, such as a strategic sale, IPO, or private equity (PE) buyout, to ensure incentives match.
From that early point, they, perhaps along with other advisers, will offer suggestions of what continuous exit readiness looks like. Clean and up-to date financials are just one part. They’ll also suggest that audit-ready metrics are in place, HR issues and processes are neat and tidy, and all legal documents are up to date.
It’s also a good idea to ensure more detailed performance data and metrics are easily available, allowing you to respond when conditions or acquirers turn favourable. This will help to speed up potential execution and improving credibility.
Common exit routes for tech startups
There are three main routes technology companies take to exit, with a few variations – you can sell ownership of the business to another company, to the public or to a different institutional investor. The suitability of each will depend on scale, growth quality, governance, and market conditions.
Trade sale (strategic acquisition)
This is probably the most common and easy to understand. Simply put, a competitor or adjacent player will acquire your company. The reasons why they want to buy your business can vary, and will affect how much they’re willing to pay and what shape the acquisition will take. They could be buying because they see synergies – or because they want what you have (which could be a product, technology, talent or customer base).
There are many pros to a trade sale, including speed, certainty, and strategic alignment. But there can be cons. Integration risk is often a big one as cultures and processes collide. It’s also more likely the buyer will want a longer earn-out, meaning you may need to work for someone else for a period (often several years) to secure the full acquisition price.
If you’re targeting a trade sale, map your likely buyer thesis early and build your business around things those acquirers care about. That could mean enterprise security certifications, complementary product features, or clean partnership agreements. Find out what they might want, and do it.
Initial public offering (IPO)
This involves listing your company on a stock exchange, a process that allows its shares (or a percentage of) to be freely bought and sold by investors/shareholders. Of the exit options, this can be the most time consuming and costly as public companies have to meet a high standard of governance and audit and that isn’t always a viable option. Often a listing occurs as a way to raise funds for the business for the future; the sale of your shares may be incidental to this and usually there will be a lock-in period during which you can’t sell. However, public shareholders tend to be less involved in a business so you may realise some or all of the company’s value while keeping an element of control of its destiny.
Other pros include access to capital for future growth, improved brand credibility, and visibility and currency for potential future acquisitions. Some of the cons would be timing of the IPO (as investor sentiment can sway quickly), increased regulatory compliance, public scrutiny of performance including having to file quarterly results, and the recurring costs of being a listed company.
If you’re aiming for an IPO, start instilling public company disciplines long before the listing process begins. Transparency, predictable performance, and quarterly guidance will be essential. Though UK regulatory reforms are trying to simplify the listing process, the practical work of readiness - including internal controls, governance, and reporting - remains non-negotiable.
Private equity (PE) buyout/secondary sale
Of all the exit strategies, this could be the one that might look least like an exit in some ways. You’re simply swapping one investor for another but it should be seen as a necessary step on the way to a full complete exit. and potentially with the opportunity to realise some of the value in the company in the process. Typically, a private equity fund or secondary buyer will acquire a stake from existing investors.
Pros of this approach include access to some cash with ongoing operational support, and continuity. Cons might include more borrowing resulting in more financial controls and tighter covenants.
If you’re anticipating a private equity or secondary transaction, your focus should be on demonstrating the consistent use of a business plan and cash conversion. Investors look for businesses where they can clearly see how growth and profitability can be improved – for example, by setting the right prices, retaining more customers, or increasing profit margins. They want to see an ability to execute on them. Numbers will matter, and buyers will value efficiency over hype.
Plan for exit readiness – a check list
Numbers matter
Effective exit planning begins with a compelling value story built on hard metrics, including durable growth, healthy margins, strong customer retention, and operational efficiency. Most investors and acquirers will expect numbers to speak louder than words. Don’t say that you have a strong sale pipeline - show it with a history of a repeatable sales process that delivers consistent conversion rates.
Diligence ready – always
You’ll need to demonstrate that your operations are diligence ready. This includes maintaining up-to-date management accounts, clear revenue recognition policies, tidy contracts, and a clean cap table with accurate option records. Readiness is about being able to respond to questions at any time without delay or confusion. Having the little things organised and under control gives a buyer confidence in your value.
Legal matters
Strong legal and governance foundations are critical. Intellectual property should be assigned to the company, not to founders or contractors. Data protection compliance must be documented and defensible, while board minutes, consents, and shareholder resolutions should be up to date and accessible. These hygiene factors seldom win a deal, but they can certainly derail one if they’re missing.
Market position
Equally important is market positioning. Sellers need to demonstrate a defensible product, a clear point of differentiation, and an understanding of how that positioning aligns with potential acquirers or IPO criteria. Being able to show a credible buyer map and being clear on who might acquire you and why, signals strategic maturity.
Personal matters
The best exit strategies also integrate tax and personal objectives. Founders must decide how much money they want to take, what level of earn-out exposure they can tolerate, and how much risk they’re prepared to retain. Addressing tax and accounting issues early and being clear on expectations can prevent unnecessary value leakage later in the process.
Avoiding common pitfalls
Compromise
The biggest pitfall might be an unwillingness to compromise. Many founders and boards stumble by waiting for perfection. Markets rarely wait. The aim is to be ready, not flawless; buyers may appear before you expecte.. You must be able to respond.
Oversharing
Another frequent error is oversharing during the process. Sellers should disclose only what’s required at each stage, via a secure data room and under strict non-disclosure agreements. Over-communicating sensitive information too early can create risk if a bidder walks away. Standard practice is to implement and stick to disclosure agreements, maintaining tight access control throughout due diligence.
Valuation is not everything
Equally dangerous is focusing on valuation at the expense of the terms of a deal and the small print. The structure of the deal - including the details of the terms, and post-close covenants - can drive the real value of a transaction more than the headline price. These elements can make the difference between a good exit and a costly one. It’s also important to avoid tunnel vision when it comes to negotiation. Don’t let price dominate other priorities such as speed, certainty, and retention.
Getting the timing right
Ignoring macroeconomic timing can also destroy value. Forcing an IPO into a weak market or rejecting a strong strategic offer in the hope of higher multiples while interest rates rise can both prove to be expensive errors.
Get good advisers
Finally, too many companies approach the sale process without the right skillset available. For most people selling a business is something that they only do once or twice, so it makes sense to work with an adviser who has the experience that you don’t.
Facing a large corporate or private equity legal team with generalist counsel is a false economy. Sector-specific legal expertise - lawyers who understand deal structures, regulatory nuances, and industry dynamics - will always pay for itself.
A well-planned exit strategy is more than just a final step - it’s about setting your business up for long-term success from day one. By planning ahead, staying agile, and keeping your house in order, you’ll be ready to seize the right opportunity when it comes along.
Whether your goal is a sale, IPO, or secondary investment, being exit-ready means you’re in control - maximising the value you’ve built and ensuring all your hard work pays off when it matters most.
