I received an excellent portfolio update today. It was around ten pages long and included lots of data about the industry, along with changes that supported the company’s strategy. It also shared positive metrics such as 60% sales growth in 2025, client renewals, and new customer wins.
After reading the update, however, I realized that I still did not know much about how the company was REALLY doing, or whether those new clients were strategically valuable to potential acquirers. Was it just new revenue, or was it the right kind of revenue?
That is when I started asking questions. We have been in this deal for a number of years, and yet this update made no mention of exit strategy. That led me to think maybe the founders are focused on the wrong things. Maybe it is just about landing customers without really thinking about how value is created. Why were they not thinking or talking about exit strategy? It made me worry that an exit could still be another five years away, which is something no angel investor wants to hear. And probably, if the founders are not thinking about exit strategy every day, it WILL be another five years.
I also realized that 60% year-over-year growth is awesome, but I did not know what the company was growing from or to. If I were thinking about exit strategy, I would not know whether the company was getting close to being large enough to move the needle for an acquirer. That number is different for each company, but once a company starts to hit $10 million to $25 million in revenue, the exit options often start to become more interesting.
Angel investors have an edge over VC investors because we get involved early, while valuations are still low. That means a $100 million exit, which might be a disappointment for a unicorn-hunting VC fund, could still return 10x or 20x our money. Those returns may diminish if there are one or more follow-on rounds, but the core idea remains the same: angels can generate excellent returns even with exits below $100 million.
But you cannot even get to sub-$100 million exits without knowing who the likely acquirers are, what they are looking for, what revenue targets matter, and how to begin building those relationships years before a potential acquisition.
So the next time you get an update from a portfolio company, do not hesitate to reach out to the founders and ask about their exit strategy. Ask for their financials. Ask how many employees they have and whether there have been any new management-level hires. Ask how they plan to evolve their marketing strategy to support scale. And ask what they are doing to move FAST.
Asking these questions can make the difference between investing in a venture-scale company and making a lifestyle investment.
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