2 days ago
Most companies don't IPO, so here's how to plan for your likely exit
The most important day of an entrepreneur's journey might be the one when it ends. The big question: Will it end on your terms?
That's the dilemma behind most startup exits, whether they take place through a merger, acquisition or an initial public offering (IPO). Experts put that distinction front and center during the 2025 Builders Conference session titled 'M&A or IPO: What is Your Company's Destination?'
Moderated by Mike Ravenscroft of the University System of Maryland's Maryland Momentum Fund, the conversation featured attorney Kim Klayman of Ballard Spahr and Alexis Grant, founder of the M&A-focused newsletter They Got Acquired.
Together, they laid out a candid, often under-explored roadmap of what founders really need to know about exiting — and why waiting until it's too late to plan is a mistake.
'Think about it early,' Grant said. 'Gives you more options.'
The numbers are clear, Ravenscroft noted: Only a tiny fraction of companies ever go public, and even among VC-backed firms, IPOs are rare. The vast majority of exits happen via mergers and acquisitions (M&A).
The panelists agreed that the perception gap around what makes an exit 'successful' can obscure the reality of its true impact. A $7 million sale might be life-changing for a bootstrapped founder with majority ownership. But if that same company had raised venture capital at a high valuation, the founder might walk away with little or nothing.
'If someone raises $5 million and they sell for $5 million, they probably didn't get any money,' Grant said.
That disconnect is even more stark during economic downturns or slower capital markets. Klayman pointed to the increase in smaller companies acquiring other small firms — sometimes simply to pad revenue, not gain technology. But these all-stock or acqui-hire (in which a company gets acquired for their talent) deals can mask another story: Sometimes, the best-case scenario is simply survival.
'The reality is most companies end up in an M&A situation, even if it's a multi-generational business,' Klayman said. 'It does end up a lot of times in an M&A transaction if there is no succession plan.'
The hardest parts that too few talk about
Asked what founders need to prepare for, both panelists were unequivocal: The due diligence process is brutal.
'For many [founders], due diligence ends up being a second job,' Grant said, adding: 'You also have to keep running the business, and you want to run it in a way that performance does not drop, because that's the worst thing that can happen when you're going through a deal.'
That's why both she and Klayman emphasized the need to 'get your house in order' — and do so early. From knowing who owns the IP to having clean cap tables and documented promises of equity shares, small oversights can kill a deal late in the game.
'I have actually seen one deal die because the whole company was built on this one piece of software, and that's what the buyer wanted,' Klayman said. 'And it was like, a software developer did it 25 years earlier, and they didn't paper it because it wasn't that important. And the deal just died.'
She advised founders to use tools like Carta or diligence-prep software to identify red flags before a transaction is even on the table. Attorneys can help, but so can platforms that flag missing consents or unsigned option grants.
'Being organized is like 95% of the battle,' Klayman said.
The stories behind the headlines
Of course, learning these details can be difficult when many companies don't discuss them soon after an M&A takes place. The panel also pulled back the curtain on how mergers and acquisitions are framed in public — and how different the internal reality can be. Grant, whose company profiles founder-led exits, said PR statements often overhype vague synergies and downplay job losses or underwhelming returns.
She added that sellers are often far more candid a year or two post-sale.
'Most of the stories we write, they're usually at least six months after the acquisition has taken place,' Grant said. 'The seller is more open to sharing real details at that point.'
Klayman agreed: Sometimes the announcements make it seem like someone got a bunch of money, when usually the investors, even if they're paid first, 'are getting like 10 cents on the dollar,' she said.
'I don't think that people want those types of transactions to happen,' she said, 'but when they do happen, it takes effort and, I think, actually responsible founders to make it happen.'
All emphasized that outcomes must be evaluated in context. Founders may sell to give their team stability, find a new role or offload a company responsibly instead of shutting down. What matters, they said, is alignment between a founder's goals and their investors' expectations.
The closing message to founders was clear: Plan for your endgame from the beginning. Think through potential paths — and not just the flashy ones. Ask investors what their expectations are. Build a network that includes not just mentors and peers, but service providers who understand exits and won't charge you just to ask questions.
'If you don't know what success looks like, you're going to be poor no matter what,' Ravenscroft said, 'because you won't know it if you get it.'
