How far advanced should my ‘end game’ be when negotiating with an investor?

If you are an early stage or high growth company it is very difficult to forecast how and when you will exit the business.

It is even harder to predict a valuation for the business on exit.

When talking to new investors you should not try to forecast in concrete terms your exit timing or valuation as you will at best be wrong, and at worst you might leave yourself open to a future friction or litigation if such an exit does not occur.

It is best to refer to timing and valuation and exit options as “indicative only” in writing (email and presentations) and verbally.

By all means refer to transactions and valuations in your sector and suggest that you are aiming for a similar result.

For example, if you have an online travel business you could refer to the Yahoo! 7 acquisition of TotalTravel for around $20m, which was around 7 times ebitda, as a comparable deal.

You should not refer to Google’s acquisition of ITA Software for $700m as a precedent.