When is the right time to exit an investment?

1 Market conditions

One of the most important factors to consider when exiting an investment is the state of the market. You want to exit when the market is favorable for your sector, industry, and stage of development. For example, if you invested in a biotech startup, you might want to exit when there is a high demand for innovative drugs or when there is a consolidation wave in the industry. On the other hand, if you invested in a consumer app, you might want to exit when there is a strong user growth or when there is a potential acquirer in the market.

2 Company performance

Another factor to consider when exiting an investment is the performance of the company. You want to exit when the company has achieved its milestones, validated its product-market fit, and demonstrated its scalability and profitability. For example, if you invested in a SaaS startup, you might want to exit when the company has reached a certain level of revenue, customer retention, and market share. On the other hand, if you invested in a hardware startup, you might want to exit when the company has launched its product, secured its supply chain, and reduced its costs.

3 Return expectations

A third factor to consider when exiting an investment is your return expectations. You want to exit when you have achieved your target return or when you have maximized your return potential. For example, if you invested in a seed stage startup, you might want to exit when you have achieved a 10x or 20x return on your investment or when you have reached the limit of your ownership stake. On the other hand, if you invested in a later stage startup, you might want to exit when you have achieved a 2x or 3x return on your investment or when you have reached the peak of the company's valuation.

4 Portfolio strategy

A fourth factor to consider when exiting an investment is your portfolio strategy. You want to exit when it aligns with your overall portfolio goals, diversification, and risk profile. For example, if you have a large and diversified portfolio, you might want to exit when you have an opportunity to reinvest your capital in new or existing opportunities. On the other hand, if you have a small and concentrated portfolio, you might want to exit when you have an opportunity to reduce your exposure to a single company or sector.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?