#13: Operationally realistic take on making money as a founder

The IPO dream might be a bit delulu

Apr 29, 2025

👋 Hey Diana here! Welcome to this Operations Optimist newsletter. Each week, I tackle questions about building operations functions in startups and share my lessons from working in venture capital! In today’s newsletter, we break down how startup founders actually exit their businesses.

Founders love to talk about the exit. But very few actually get there, most startups die trying. Even those with traction struggle to convert momentum into money. According to PitchBook, the median time to exit (via IPO, M&A, or other) is around 8.2 years. That’s a lot of ramen and anxiety.

So let’s break down what exits really look like — and which paths founders actually take when it’s time to cash out.

3 paths to founder payday

If you want to turn years of sweat equity into an actual payout, you need to know how the money really moves. Here’s the breakdown.

1. The IPO: is this the real life or is this just fantasy?

Everyone knows the IPO story. Your logo rings the Nasdaq bell, and you become a case study at the Stanford Strategy course.

An IPO (Initial Public Offering) is when a private company lists its shares on a public stock exchange to raise capital. The founders and investors can now sell shares to the public. It’s the textbook definition of “exit” — and what gets drilled into your head in every MBA program.

The reality? IPOs are exceptionally rare. In fact, fewer than 1% of startups ever go public. Most will never be close. The markets need to be receptive. Your revenue needs to be stable. Your governance needs to be pristine. And even then, going public is expensive and grueling, and the timeline is measured in years.

2. Mergers and acquisitions: the practical play

This is the real way most founders exit (partially or fully).

M&A (mergers and acquisitions) means your startup is bought by another company — often a bigger player that wants your tech, team, or market position. It can be strategic (e.g., Google buying your AI startup to leapfrog competitors), or financial (private equity scooping you up for your cash flows).

Example: Loom had built a fast-growing async video tool used by millions. Atlassian didn’t need to build it — they just needed to own it at a hefty price tag $975M.

If you have a buyer, you can exit without being “public-ready.”, exit at any stage and sometimes even might still run the business (under a new flag). Typically it’s much faster than IPO, unless it’s Adobe buying Figma.

3. Secondaries: liquidity without leaving

Secondaries are your secret weapon — especially if you're not ready to leave but still want to realize some of the value you've built.

A secondary sale is when you sell your private shares (or options) to another investor — often in a later stage round. This gives you liquidity without needing a full company exit.

Why secondaries matter:

You diversify your net worth (i.e., not all in one startup-shaped basket)
You reduce pressure to exit fast and can think long-term
You get liquidity in a tax-efficient way (capital gains > income tax)

Secondaries are becoming more common as investors realize burning out the founder doesn’t help the company. If you're a founder with 99% of your net worth tied up in your Series B startup — get a secondaries clause in the next term sheet.

That’s it.

Here’s what we covered today:

IPOs as an exit scenario are highly aspirational
Mergers and acquisitions are the real MVP of startup exits
Secondaries are a low-drama way to reduce risk while staying in the game

Your job isn’t just to build a great product, hire exceptional people, and outperform your competitors. It’s also to build a business that’s acquirable and that’s worth someone else’s money.

And no matter how you exit your position, you still need to set the foundations right. Clean cap table, clean financials, real governance. Otherwise, tough sell.

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Operations Optimist