If Startups and Investors Don’t Agree On an Exit

An article we liked from Thought Leader Dave Berkus:

What if you and your investors don’t agree on an exit?

First, the implied promise:

Taking money from professional investors such as angels or VCs usually requires that you agree to seek an exit for those investors in your plan, often targeting five to seven years as the ideal period for growth before a liquidity event.

Of course, even though that is your contract with the investors, way over half of those implied contracts never work out that way.

What if you later decide to just keep control?

It is perfectly OK for you to want to grow your company and plan to keep control for you and your offspring, with no intention to sell. There’s a name for this. We say that you are growing an evergreen enterprise, one in which outside money is to be taken in the form of loans or royalty agreements, not shares of stock or ownership.

Investors will not be happy and will usually react.

Of course, you will find yourself in opposition to your investors and some of most of your board members if you do this after taking outside investment. There are clauses in preferred stock investment agreements allowing the investor in many cases to...