Exit slides in pitch decks are fraught with danger. Twice this week, I was asked about whether I include one in my pitch deck.
The answer is ‘No’.
The punchline of this post is that founders don’t know how or if they will exit their venture. That’s because there are too many known and unknown variables that could result in success or implosion.
Seasoned investors know that.
So do serial entrepreneurs.
But at some point in the last decade, it became a thing to include an exit slide in pitch decks.
You don’t know, and you just wasted time
Exit slides usually offer two or three options that the founders hope will result in a liquidity event. They are included in pitch decks under the misguided idea that they communicate a full understanding of a business model or lifecycle to investors.
The reality is that the simple inclusion of this slide speaks volumes about the founder. And not in a good way.
While it might not be a founders intent, an exit slide can suggest one of three things.
First, you appear naive.
There are many milestones to achieve before an exit can be contemplated. The suggestion that you’re thinking about exit options also suggests that you are not applying the right effort to higher priorities like distribution, product, hiring and cash flow.
I also think about it this way; if one slide of a 10-slide pitch deck (or 30 seconds of a five-minute pitch) is dedicated to an exit slide, you’ve just diluted the narrative and make ‘the ask’ less engaging.
Second, you look like a mercenary.
One of the first things investors seek to understand about founders is whether they are ‘missionary’ or ‘mercenary’.
Missionary founders, as the name suggests, are those who are mission-focused, obsessed about creating value by serving their users and customers, and creating a paradigm shift. Missionary founders are there for the long haul and often have the scars to prove it.
And in a nutshell, mercenary founders have a more singular focus on making money. The behaviours that mercenary founders deploy to achieve their intent often end up damaging the company.
Third, you are listening to the wrong advice.
As I’ve written about before, startup ecosystems are full of well-intentioned advice that lacks lived experience. If advisors are strongly suggesting to include an exit slide, check how this has helped them in the past. As an entrepreneur.
Listen to those with lived experience and if there advise is contrary to mine, I’d love to hear from them!
Never waste the first impression
It’s possible that pitch recipients won’t make the connection between an exit slide and a founder being naive or a mercenary.
But why take the chance?
A pitch is the first impression. In those early few minutes, founders need to deliver a super compelling story. If potential investors, partners and hires see value in your business model, they will find a way to connect. If they detect naivety or hubris, that call won’t come.
Know the exit potential
Most entrepreneurs and founders-turned-investors I know are optimists. We look forward to realising value from our efforts. We are continually thinking about how to deliver on our missions by creating value for customers, partners and those who invest in us. This also means we spend time contemplating who might acquire our businesses or what businesses we might acquire to further our mission.
Every founder should be ready to have a conversation with investors about potential exit options. It’s just not necessary as part of a first impression.
If as a founder, the exit potential is not clear, consider discussing it with co-founders and mentors. It can be a useful exercise in dreaming forward. It can also reveal ideas for new strategic partnerships.
One last thing…
Time is everything, especially when pitching a new business model.
Be clear on what a red flag can be before you pitch, and an exit slide is unquestionably one of them.
Invest time in dreaming about the future and prepare answers to what an exit could look like. These are important things to do. They just don’t need to be part of your first impression.
And if you get asked about your exit strategy when pitching, consider it and respond with, ‘Our focus is achieving product/market fit. We’ll think more about exit options when the time is right’.