A Late-Stage Startup Founder’s Guide to Exit Strategies

Introduction

A major goal for startup founders is to reach an exit. That exit can take many different forms, though, and each type of exit comes with distinct risks and paths to success.

Mergers and acquisitions (M&A) are a likely exit for many startups, but many founders set out to go public for ultimate prestige and access to higher amounts of capital. Founders may also dream of buying back their business for complete, private control.

However, startups should also be mindful that not all exits are positive, but they should be planned for anyway. Approximately 90% of startups fail, with many of them failing within their first year. Preparing for potential bankruptcy or shut down can help minimize turbulence and losses, especially if you go on to restructure after filing for bankruptcy.

No matter where your startup journey takes you, this guide will explain the various types of exit strategies, provide examples of real-world startup exits, outline steps for planning exit strategies, and more.

TL;DR: Exit strategies for startups

• Five main exit types: Acquisition (company buyout), merger (joining with another company), IPO (going public), management buyout (founders/leaders buy back control), and bankruptcy/liquidation (winding down operations)
• Plan early and often: Include exit strategies in your initial business plan and review them every 6-12 months, and start detailed planning 2-5 years before your target exit date
• M&A leads: Around 90% of startups don't succeed, with only 1.5% achieving exits valued over $50M, making M&A deals (43% of exits) more common than IPOs (6% of exits)
• Preparation is key: Align all stakeholders, complete due diligence with legal/financial experts, build company value, and create a compelling narrative to attract buyers or investors
• Avoid common pitfalls: Misaligned expectations, poor timing, overvaluation, lack of transition planning, and waiting too long to start the exit planning process can derail your strategy

Startup exit strategy vs. traditional business exit

An exit strategy refers to how a business owner or investor plans to sell or transfer their ownership of a company. However, this process can look different for startups compared to traditional, established businesses.

A startup exit strategy is crucial because startups grow rapidly and inherently carry high risks. Ownership can change as the founding team adjusts and investors come on board.

Only about 1.5% of startups have exits valued at over $50M, according to a report from Startup Genome. Because around 90% of startups fail, many startups simply shut down or exit through liquidation or bankruptcy. Startups may eye an initial public offering (IPO) for a lucrative exit, and these companies need to consider different exit strategies for each founder and investor.

By comparison, traditional business exits may focus more on mergers and acquisitions, but they may face less turbulence as executive leadership changes hands. The business is more established and has a better understanding of its market, which comes with lower risks compared to startups.

Why startup exit planning matters

When you start a business, it can either grow and succeed — or fail. Either way, you need to be prepared for the consequences. Here are several reasons why planning for startup exits for key stakeholders is essential:

• Fundraising: When pitching investors, including exit strategies within your business plan shows forward-thinking and that you are prepared to handle forecasted growth. You’ll also want to communicate with investors about their exit strategies after fundraising, so you can prepare for when they eventually leave.
• Team morale: Startups already come with a lot of risk, but uncertainty around the future of leadership can hurt team morale and trust. Communicating exit plans, such as if a founder expects to leave or the founders are eyeing a merger or acquisition, can improve team morale.
• Long-term growth: Exit planning can complement long-term growth by establishing goals for the company to work toward.
• Stability: Changing leadership or exiting investors without any plans in place could take a scaling startup team by surprise. Having strategies in place for responding to different exit scenarios can create more stability if an investor exits, a founder leaves, the company is acquired, or the startup merges with another company.
• Risk reduction: Failing to plan is planning to fail. Even if you’re not aiming for an IPO, establishing an exit strategy helps reduce the risk of your startup failing by accounting for changes to your business and establishing responses to those shifts.

Types of exit strategies for startups

Every startup journey is unique, and exits can look different for each founder and/or investor. However, these are some of the most common types of exits for startups to consider when building their exit strategies.

• Acquisition: An acquisition is when one company takes over ownership of another company. Startup founders may hope to be acquired by a larger company.
• Merger: Similar to an acquisition, a merger is when two companies join together as equals to form a new company.
• Initial public offering (IPO): An IPO occurs when a company launches on the stock market and begins selling shares of its ownership to the public. This marks a transition from a privately owned startup to one that is publicly owned and traded.
• Management buyout (MBO): An MBO occurs when startup leaders purchase a majority ownership stake to take over the company. This could happen in several ways, such as one founder buying out another founder or a founder buying the company back from investors.
• Bankruptcy: Startups struggling financially may face different bankruptcy scenarios. They may have to cease operations and sell off their assets, known as liquidation. Or, they may face reorganization, in which the company’s assets are reorganized and a debt repayment plan is established in court.

How to choose the best exit strategy for your startup

The best exit strategy for your startup depends on current market conditions, the stage of your startup, and your goals as a founder. Some startups may hope to be acquired by a larger company or to merge with another startup. Some founders may plan for an IPO, while others aim for complete control over their startup by buying ownership from other stakeholders.

Although conditions can always vary, use these general guidelines to help you decide what exit strategies may work best for your startup.

Startup exits that succeeded (and failed)

Reaching a coveted M&A deal or IPO can be a major milestone for your business, and there are many examples of successful startup exits to inspire your journey. However, keep in mind that even going public doesn’t guarantee a startup's long-term success. Find inspiration (and read some cautionary tales) from these examples of startup exits, both successful and not.

Successful mergers and acquisitions

Mergers and acquisitions are becoming increasingly lucrative for startup founders seeking to exit. According to Crunchbase, M&A deals have already reached a high so far this year at $84B across 22 deals, up from the previous six-year peak of $68B across 29 deals. As S&P Global reported, the aggregate value of M&A deals is on the rise, up 12.2% so far in 2025 compared to 2024. 

The latest HubSpot for Startups Hypergrowth Startup Index further confirms these findings, revealing that M&A deals have become more viable for startup exits than IPOs. M&As make up 43% of the exit landscape, compared to 6% from IPOs.

Some notable M&A deals in 2025 alone include PepsiCo’s acquisition of Poppi in a $1.95B deal, and when Alphabet (parent company of Google) announced plans to acquire Wiz for $32B.

Successful IPO examples

Very few startups achieve an IPO exit, but those that do often become household (or office-wide) names. The following list features several major companies that were once small startups, which have gone public and remain successful today.

• Amazon
• Uber
• Lyft
• DoorDash
• Airbnb
• Reddit
• Meta

Some of the biggest IPOs of 2025 so far include:

• Chime
• Hinge Health
• Figma (which was nearly acquired, but went on to have a successful IPO)
• SailPoint
• CoreWeave

IPO cautionary tale

Going public doesn’t always guarantee long-term growth and success. Changing market conditions or other issues within a business can also hinder success, causing stocks to plummet.

Pets.com is a common cautionary tale from the “dot-com bubble”. The company quickly raised $82.5M in its IPO in 2000, but filed for bankruptcy and shut down by November of that year. Some companies, such as Amazon, were able to pivot during the dot-com bubble bust, but Pets.com struggled to differentiate from competitors and make its offerings more convenient and economical than what local pet stores or even grocery stores could offer to pet owners, leading to its downfall.

Successful MBO: Wistia

Wistia co-founders Chris Savage and Brendan Schwartz spent several years chasing profitability, pursuing growth at all costs, and gaining investor backing. But chasing growth and focusing on short-term gains landed them in a position where they were considering acquisition offers.

Ultimately, the co-founders acknowledged their mistakes and decided to buy back the company, running it on their own terms. They bought Wistia ownership back from investors, which initially lead to a $17.3M debt. However, they were able to right the ship quickly, follow their passion, pay back the debt, and become a stronger, more creative business than ever before.

Examples of liquidations and bankruptcies

The harsh reality is that most startups will fail, often due to poor timing, declining markets, cash flow issues, team misalignment, or other factors. Here are some examples of startup failures that offer valuable lessons to consider when planning your exit.

• Zume: This startup, which banked on pizza delivery robots, initially raised $445M. The company struggled to bring in more than it was spending and had logistical issues with building pizza-making robots. It folded and liquidated its assets.
• Freshly: This meal delivery service company was at one point acquired by Nestlé, but difficult market conditions made it harder to continue the business. Freshly announced that it would cease operations in December 2022.
• Reali: This real estate tech startup had raised over $290M in funding and had acquired other companies, but chose to wind down the business in 2022 amid a difficult real estate market.
• Quibi: This streaming service, which raised $1.75B, made plenty of headlines when it launched but quickly failed within just six months. Potential reasons for failure include misaligned marketing, lack of product-market fit, high competition, leadership issues, and a challenging market (COVID-19 pandemic) at launch.
• WeWork: Once destined to be a huge startup success with a $47B valuation, the company instead went on to become one of the biggest cautionary tales for startups. High burn rate fueled expansion but increased debt for the company, which also had a business model that became less relevant during the pandemic. There were strong concerns among investors regarding leadership, which ultimately led to a failed IPO. The company filed for Chapter 11 bankruptcy in 2023 and continues to operate today, albeit on a smaller scale and under new leadership.

Preparing your startup for exit

Whether you’re planning for an M&A deal or targeting an IPO, you’ll want to make your goals clear from the beginning. Without a plan, you risk running out of funding and losing the business before closing any deals. Follow these steps to position your startup for the most successful exit possible.

1. Align stakeholders

Your stakeholders, including the founding team, managers, and investors, should communicate clearly to ensure everyone is on the same page with your exit goals. For mergers and acquisitions, it’s essential to ensure that the two businesses align on the key goals of the deal and what the combined business may look like going forward.

2. Complete due diligence

Work with legal and financial experts early on in your planning journey, and continue to tap these professionals as you get closer to exiting. Selling or merging your business, buying back a business, going public, or declaring bankruptcy all require you to meet certain legal and financial terms. 

To complete due diligence for an exit, you will need to gather all of your business documents, including information on assets, employee payroll information, vendor information, insurance documents, all financial information, and any additional requested documents.

3. Build value

To achieve the best financial outcome for your business, it’s essential to make the business as attractive as possible. Ensure your financials are transparent and organized, reduce redundancies in your operations, reduce your expenses, build for higher revenue, position the startup for continued growth, and train and set clear expectations to strengthen your leadership and staff.

4. Create the narrative

While your business may have a great team and strong financials, you’ll still need great storytelling to persuade potential buyers or the public to invest in your startup. Explain the problem your startup solves in its market, how it differs from competitors, and any additional awards or proprietary technology that really make your startup stand out.

Common mistakes in startup exit planning

Startup exit planning comes with plenty of challenges that can disrupt your strategy and shift the course of your exit. Be mindful of these common exit planning mistakes:

• Misaligned expectations between the startup, investors, and/or potential buyers
• Poor market timing
• Poor cultural fit between companies in a merger or acquisition
• Lack of post-exit transition plans for when a founder or other leader leaves the company
• Taking too long to start planning; it’s best to plan for exit as early as possible
• Considering only one exit rather than planning for multiple potential exit events
• Overvalued business with rates too high to attract buyers
• Lack of planning for legal and tax obligations surrounding an exit

Where to begin: your exit strategy timeline

Ideally, founders should have at least a vague idea of how they’d like to exit from the very beginning, and they should build an exit strategy into the business plan. Not only does this offer more clarity and help drive the company's mission, but laying out the exit strategy early on can also impress investors and advisors.

This general timeline can help guide you through your exit, but note that every startup exit will vary. Always consult with experienced legal and financial professionals to properly prepare for exit.

• Start of business: When you’re building a business plan, make sure to include potential exit possibilities, even if you expect to exit several years down the line.
• Every six–12 months: Review the exit strategies in your business plan and make adjustments based on business performance.
• Two–five years to exit: Start planning more detailed exit strategies at least two to five years before you expect to exit. Establish milestones, such as a specific amount of monthly or annual revenue, year-over-year growth, market size, or number of active users, that you plan to hit before actively preparing to exit.
• 18 months to exit: Start evaluating your startup’s value and readiness for exit. If your value seems too low to attract buyers or your organizational documents aren’t in order, work on organizing and building value to prepare for exit.
• 12 months to exit: Consult with professional and legal experts to position yourself or the business for a successful exit. Begin the due diligence process.
• Six months before exit goal: At least six months before your targeted exit deadline, begin meeting with prospective buyers or preparing for IPO. Complete the due diligence process and file necessary paperwork as needed. Based on the strategies outlined in your business plan, begin preparing for business management transition.

Conclusion: plan early, exit strong

The sooner you can start planning for your exit, the stronger your exit will be. Planning for potential exit scenarios early in your startup journey will minimize the confusion and disorganization that come with changes to a business.

Over time, you may find your plans for exit could change. As you reach new milestones and scale the business, revisit your exit strategies at least once or twice a year to ensure those goals remain aligned with the current state of your business.

Whether you’re preparing for exit, looking to pitch to investors, or seeking other financial guidance for your startup, check out the HubSpot for Startups Fundraising Hub for more resources to scaling your startup to success.

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