Startup Syntax: The Billion Dollar Illusion
Investor Liaison Hannah Savage talks 'when exit hype meets reality'
Exits
At some point in your conversations with investors, the topic of exits will come up. Navigating this discussion requires balance. Some investors expect you to be thinking about exits from day one, seeing it as a sign that you have a long-term vision and a clear roadmap. Others may get uneasy if exit talk comes too soon, interpreting it as a sign that you're focused on a quick flip rather than building something enduring. And sometimes, when an investor asks about your exit strategy, it’s a red flag that they don’t fully understand what you’re building or how it fits into the market.
Regardless of the context, you should be prepared with a clear, well-reasoned perspective on potential exit scenarios. Comparables can be a valuable tool in these discussions, but choosing the right ones is critical. Misaligned or inflated comparisons can set unrealistic expectations both for investors and for yourself.
Hypothetically
Hypothetically speaking, Alex, the founder of Cloud Cakes, has created a premium organic take on Twinkies, made with real vanilla bean, pasture-raised eggs, and organic cane sugar. It has a cult following among health-conscious consumers and is sold at Whole Foods Market and Erewhon for $4.99 per cake.
While fundraising, Alex confidently tells investors:
"J.M. Smucker just acquired Twinkies for $5.6 billion. Given our traction, Cloud Cakes could follow a similar path."
At first glance, this sounds impressive. But investors who do their homework quickly realize Alex is overstating the comparable.
What Really Happened:
Smucker’s didn’t just buy Twinkies; they acquired Hostess Brands, which owns Twinkies, Ding Dongs, HoHos, and a full portfolio of snacks with nationwide distribution. The deal wasn’t about a single product. It was about acquiring a dominant, multi-brand company with decades of retail relationships and supply chain efficiencies.
Why This Comparison is Misleading:
Cloud Cakes is one product, not a portfolio. The $5.6B deal wasn’t for just Twinkies, it was for an entire snack empire.
Twinkies are a household name with mass distribution. Hostess snacks are sold everywhere, while Cloud Cakes is still a niche product in premium grocery stores.
Different business models. Hostess owns its manufacturing and has deep retail partnerships, while Cloud Cakes relies on a co-packer and limited retail footprint.
How To Use Comparables Responsibly:
Comparably
Instead of inflating the exit potential, Alex may comparably say:
"Premium snack acquisitions like Tate’s Bake Shop ($500M) and RXBar ($600M) show there’s demand in this space. Given our traction and market fit, we see a realistic path toward a strategic acquisition in this range."
This keeps investor expectations grounded and builds credibility—because headline numbers don’t always tell the full story.
Lesson
Founders who communicate with clarity earn investor trust. You don’t necessarily need a hyped-up billion-dollar exit mapped out from the start, rather try to share a clear, credible, and comparable story. Use comparables wisely, focus on what sets you apart, and you’ll build the right investor relationships to win.
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