Early exits are often seen as a fallback entrepreneurs resort to when their startup isn’t evolving as anticipated, since they can be used as a solution for a lack of funding, unfavorable market conditions, or mounting stress. While they can lead to profit, they aren’t typically considered Plan A.
Smart founders, however, seem to be rethinking early exits. Rather than seeing them as an unsavory option, they are embracing them as a strategic move.
“There is a shift in mentality in the business world that is leading founders to view early exits as wins rather than failures,” says Iliya Zogovic, CEO at DBD Investment Bank. “Baby Boomers and Gen Xers focused on building businesses for the long term, only exiting once they reached the success they were seeking. Younger generations, however, prefer playing the role of serial entrepreneurs, which requires a different type of private company exit strategy.”
Zogovic, who served as CEO at ONEtoONE Corporate Finance USA and as President and CEO of GSP Corp. before launching DBD Investment Bank, has an impressive track record of successfully scaling businesses in a variety of industries and regions. He co-founded DBD Investment Bank as a bespoke investment bank providing middle-market private companies and select institutional clients with M&A, capital formation, and financial restructuring support.
“Founders from younger generations consider selling at any stage a success,” Zogovic says. “By exiting before the business fails or requires a significant pivot, they build a spotless record of success and are able to move on quickly to their next venture without the issues a failure can introduce. It’s a mindset change that has made early exits more socially acceptable and desirable.”
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Escaping the stress that can impact future ventures
The risk of burnout is central to the entrepreneur’s journey. Long hours, uncertainty, and a lack of support all contribute to higher-than-average stress levels. A recent study found that 72 percent of founders report their work has had a negative impact on their mental health, with 44 percent reporting high stress and 36 percent confessing to burnout.
Less stress is one of the key advantages founders gain by taking the entrepreneur break early. Financial stakes get higher, investor expectations grow, and leadership becomes more demanding the longer entrepreneurs stay with their startup. An early exit provides relief before stress can lead to burnout.
“High-pressure environments and the stress they provide have always been an unavoidable part of the entrepreneurship journey,” Zogovic says. “But by being more open to early exits, today’s entrepreneurs are taking steps to mitigate the long-term effects of stress and avoid burnout. Normalizing early exits allows burnout to be an option rather than a given.”
By avoiding burnout, entrepreneurs are better prepared to jump back into entrepreneurship after their exit. They need less, if any, downtime for recovery and refocusing. And they have less trepidation about becoming founders again.
Emerging stronger and better equipped for the next venture
The new positive perspective on early exits is fueled in part by founders stepping into the role of the serial entrepreneur. Rather than seeing their current startup as the whole story, they tend to view it as one chapter. Exiting early, when done strategically, allows them to quickly start work on the next chapter.
“An early exit can empower a stronger long-term entrepreneurial record,” Zogovic shares. “It gives entrepreneurs the credibility and experience to pursue new ventures more effectively. It also provides founders with liquidity that gives them freedom to focus on their next venture, sometimes even fund it.”
Entrepreneurs who prove themselves capable of commanding a successful early exit increase their value in the eyes of investors by demonstrating their ability to create value quickly and navigate complex business challenges. They may also leverage the founder liquidity event to take on more ambitious projects, using their earnings to invest in other startups or become angel investors themselves.
Orchestrating an early exit
A conventional startup strategy won’t necessarily lead to an effective early exit. Entrepreneurs must take steps to craft an intentional private company exit strategy focused on that outcome.
“Developing a clear and compelling value proposition that attracts potential acquirers is essential to orchestrating an early exit,” Zogovic explains. “Startups that launch with a minimum viable product and the expectation of developing it over time won’t be as effective at achieving an effective early exit.”
Recruiting a strong team with diverse skills and experience, as well as ensuring financial, legal, and operational systems are solid, are also critical to positioning a company for an early exit. Those components will make it easier to build relationships with investors, strategic partners, and potential acquirers.
“Entrepreneurs eager for an early exit should also seek guidance from experienced advisors, such as boutique investment banks, to gain the insights needed for successfully navigating the exit process,” Zogovic advises. “Having an experienced partner ensures the process doesn’t get bogged down during negotiations, due diligence, or the other processes critical to a successful exit.”
The startup landscape is changing, with funding becoming more difficult to secure, especially for long-term ventures. Smart founders are adapting by adopting a new mentality that embraces early exits. By taking the entrepreneur break early, they gain the emotional and financial resources they need to come back stronger and build a string of successful startups.
