In this episode, Hall welcomes Richard Raizes, Partner at Plutus21 Capital. Plutus21 is a Dallas-based investment firm focused on alternative assets such as crypto, venture capital, and real estate.

Before early-stage investing, Richard received a finance degree from SMU in Dallas Tx. He then worked in both investment and corporate banking. Richard has worked in a variety of sectors, most recently, oil and gas and commodities. He has always looked at niche assets and alternative assets. Richard comes from a family background in technology, so with the experience of analyzing companies and underwriting different deals over a course of time.

If they don’t define the exit, then you define the exit.

Today, we’ll talk about how to achieve an exit in a startup investment.

It’s easy to get into a startup investment, but difficult to get out- especially with a positive return.

Most startup exits come when they sell the business to another company or go public on the stock exchange.

It takes seven to ten years to achieve an exit in most cases.

Most investors let the startup define the exit.  If they do, that’s great.

If they don’t then you define an exit for your investment.  

I recommend using a convertible note that has a 3X in 3 year redemption right at investor sole discretion. This provides you the option of exiting at the 3 year mark or staying in for the long haul.

By year 3 it becomes clear where the startup is headed. They are either on the venture path to larger returns or they have left the venture path and moved into payroll mode.  

The problem with leaving the venture path is that most terms sheets give the investor an equity stake. If the company leaves the venture path and turns into a lifestyle business, then the equity is going to be worth at most a small return typically around the ten year mark. 

Define the exit you want and make an offer. Not all startups will take it, but many will.

Thank you for joining us for the Startup Espresso where we help startups and investors connect for funding.

Let’s go startup something today!