One of the most important factors is differences in industries because some tend to move faster than others when it comes to startup exits.
For instance, on average, tech and software startups normally see pretty quick startup exits. This is a result of a general high (and constant) demand for new tech as well as rapid innovation cycles. Thus, it’s pretty standard for tech startups to aim for either IPO or acquisition within about five to seven years, and most successful tech startups are able to make this a reality.
Businesses in other sectors, things like biotech, for instance, tend to take a fair bit longer than tech startups – about ten to twelve years on average. A few reasons for this include things like regulatory requirements as well as the length of development cycles and clinical trials.
Attracting Funding and Expectations of Investors
One of the most important aspects of developing a successful startup is secure venture capital (VC), and it is also one of the most significant driving factors in determining a startup’s timeline to exit. Normally, VCs aim for an exit within a timeframe of about five to ten years in order to realise the returns on their investments.
Of course, this means that startups that are backed by a lot of VC tend to face a lot of pressure to scale up quickly and either seek acquisition or IPO once they’ve demonstrated a significant and sufficient amount of growth or market share.
On the flipside, however, if the startup is doing very well and will be able to sustain itself for longer, founders may choose to keep things going privately in order to build more value and get more out of it in the long run.
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Startup Growth and Revenue
It’s only natural that startups that show rapid revenue growth and scalability are far more likely to attract acquisition offers or IPO earlier than those that are growing a little more slowly.
In industries like digital services and software development, it can be easier to achieve significant growth pretty quickly. However, for businesses that require a substantial amount of infrastructure, it tends to take longer to get there due to needing more investment in the first place.
IPO Vs. Acquisition
There’s no single exit strategy for startups, although it is more common for young businesses to go opt for acquisition rather than IPO. An acquisition can happen at any stage of a startup’s lifespan, as long as it offers expertise, technology or a market position that is attractive and deemed valuable to a larger company.
Normally, for tech startups, acquisitions happen within about three to seven years, and for companies in other sectors, it tends to be a bit longer than that.
Market Conditions
Sometimes, it has more to do with external factors than the startup itself, and the importance of market conditions cannot be overstated, especially at the point at which startups decide to get.
During strong economic times, companies tend to exit faster as valuations are higher, and there’s also increased interest in acquisitions and IPOs. Conversely, however, during a period of economic downturn, lots of startups delay their exits until things pick up again, with investors and founders waiting until the timing is a bit better.