The Best Time to Sell Your Startup Isn't What You Think

For most founders, the dream is to sell their business startup. But the path to acquisition is often a nightmare—a long, bureaucratic slog that can pull you away from what you do best: running your company. And after all that, a deal is never guaranteed.

Still, you’re about sixteen times more likely to get bought than you are to have an IPO. If you want to achieve that dream sale, you have to play the odds. That means knowing exactly when to sell. A few key data points can help you map out your exit, understand the process, and decide on the best time to make your move.

Understanding What Buyers Want

To figure out when to sell, you first have to get inside a buyer’s head. Understanding their motivations gives you a huge advantage when it’s time to negotiate. Acquisitions typically happen for one of two reasons.

A strategic acquisition is about growth. The buyer wants to boost their revenue or break into a new market, and your company is the fastest way to do it. They see value in your technology, your team, or your customer base. A classic example is when Verizon bought AOL; they weren’t just buying a brand, they were acquiring AOL’s mobile advertising tech to grow their own revenue.

The other type of buyer is a financial one, often a private equity (PE) firm. These firms use their capital to grow a company with the sole purpose of increasing its value. Their goal is to either take it to an IPO or sell it for a much higher price down the road. For instance, Great Hill Partners bought ZoomInfo for $200 million in 2017, only to sell it a year later for $400 million. A PE firm will often bring in a new management team, push for aggressive growth, and then look for their own exit.

What Makes a Startup Company a Target?

Now that you know what drives buyers, what exactly are they looking for in a startup company? It usually boils down to three things.

• With hundreds of thousands of startups created every year, buyers can afford to be picky. To even get noticed, your company needs to stand out. This could be your Annual Recurring Revenue (ARR), unique technology, or a powerful value proposition. You don’t have to be one-of-a-kind, but you absolutely have to be compelling.
• Size is a strong signal of success. Most private equity firms won’t even look at a startup until it hits around $10 million in ARR. Even strategic buyers often wait for the $5 million ARR mark. Why? Because size demonstrates a healthy customer base, proves your business model works, and suggests a higher chance of future success. Smaller startups often get stuck in a buyer’s “wait and see” pile.
• You can be small and incredibly profitable, but if no one knows who you are, you’ll struggle to find a buyer. So much attention goes to the bigger players, so you need a story strong enough to get people talking.

The Funding Dilemma: When to Sell

Your fundraising stage is closely tied to how easy it will be to sell your startup. In a great piece for TechCrunch, Jason Rowley broke down the connection between funding rounds and the likelihood of being acquired. The data tells a fascinating story.

Every round of startup funding has a name: Series A, Series B, and so on. The analysis shows that most startups are acquired during Series E. But that’s a bit misleading. Very few companies ever make it that far. The ones that do, like the unicorn Carta which raised $1.8 billion, are usually financing a vision that has grown exponentially.

So, when is the best time? The probability of being acquired doesn’t change much between Series C, D, and E, plateauing around 15 to 16 percent. The biggest jumps in likelihood happen earlier on:

• Between Pre-Series A and Series A:
• Between Series A and Series B:
• Between Series B and Series C:

This makes sense. The more you prove your value to investors through successful funding rounds, the more attractive you become. A well-funded business often looks like one of those scalable side hustles destined for bigger things.

Why an Early Offer Might Be Your Best Bet

While the data suggests you’re more likely to be acquired further down the road, you have to consider the reality of the grind. Progressing from one funding stage to the next is incredibly demanding, with no guarantee of success. And all that time spent fundraising is time not spent growing your business. It’s easy to get distracted chasing big numbers and accidentally disrupt your own profitable company.

A better strategy might be to accept a good offer when it’s on the table. It’s true that only about 8 or 9 percent of startups in the data set were acquired at the pre-Series A stage. But here's the kicker: a massive 60 percent of companies at that stage never make it to Series A at all. This journey often starts as a side project, but when it evolves into one of those side hustles that can become full time, the stakes get higher.

So, if you get a good offer early on, why not take it? You can bank the win and apply everything you learned to your next project. For many, building a company is a form of investing as a side hustle, and knowing when to cash out is the most important part of the game.

To sum it up: