Positive Impact Exits

Positive Impact at Exit

I recently became aware for the first time about the concept of positive impact at exit time, when Andrew Kuper with Leapfrog Investments discussed how his company combines profit with purpose, even at the exit stage. This principle, which makes part of the Operating Principles for Impact Management, posits that the investor should ‘conduct exits considering the effect on sustained impact’.

The Operating Principles for Impact Management are the following:

Impact Investing

My exits so far …

So far, there are two ways in which I have exited the startups in which I had invested:

1.- Bankruptcy and Reorganization (SSL Europa, Fidzup, Alg & You),

We all know that startups are experiments and that many fail due to different reasons (albeit always the same). I will post another day the reasons why the startups mentioned above failed. Here, I want to bring your attention to the fact that even in exits due to bankruptcy and reorganization, there are conflicts and tensions between the different stakeholders, particularly the creditors.Different legal systems provide for different arrangements, but in general, equity holders lose all of their investments at this point.

The bankruptcy system’s role is to provide for an upfront, known, fair, and foreseeable arrangement among creditors. The legal systems that prevent a company from going bankrupt or reorganizing result in perverse incentives and moral hazard. Even in the case of large financial institutions, ‘too big to fail,’ bailouts, and the like are out of favor. There is an increasing tendency to avoid asking the taxpayers to pay. The new trend is the bail-in in which debt creditors have their claims written down or converted into equity.

In the case of startups looming with bankruptcy, despite the pleads of the founders, there is almost no sense in throwing good money on to a dead body. The best thing to do is to learn and move on.

2.- Acqui-hires (Level V, Weezic).

Even though there is a signed shareholders agreement in place that supposedly rules the relationship among shareholders, receiving an offer to be acquired usually triggers some tensions. There are generally explicit and hidden conflicts between the stakeholders, namely, employees, founders, shareholders, and VCs. In acquihires, founders can find many ways to be compensated by the potential acquirer without any obligation to share such gains with the other shareholders. As Mike Brown stated in What Everyone Should Know About How Talent is Bought and Sold, this is the time for founders to be honest and transparent. As he says, “Your investors had the courage to take a risk in backing you, so don’t hide things from them — be clear about what the deal says. They’ll figure it out,”

As a business angel, if the exit price is fair, you should not fight with the founders. You can get the proceeds from the sale and fund your next future unicorn. The founders are the lucky horse that you had been riding, and you should be happy that someone with larger pockets has identified and validated your investment thesis. It is not worth being sour; instead, we should accept this outcome as one of the regular possibilities when investing at the seed stage.


I hope to be able to see one of my startups be acquired, as part of a transaction where the purchaser is interested in more than the founders’ team, or exit via an IPO. When this day arrives, I will ensure to remember to decide what is best for me, considering the effect on sustained impact.

When conducting an exit, the Manager shall, in good faith and consistent with its fiduciary
concerns, consider the effect which the timing, structure, and process of its exit will have on the
sustainability of the impact.

Impact Principle No. 7

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