what exit strategies do angel investors want or prefer for a service business

Angel investors in service businesses generally prefer exit strategies that provide clear paths to liquidity and returns on their investment. Common preferred exit strategies include:

- **Acquisition by a larger company:** This is a frequent and attractive exit because larger companies may buy the service business to gain market share, talent, or capabilities, offering a potentially quick and profitable exit for angel investors.

- **Initial Public Offering (IPO):** Though less common for service businesses due to scale and maturity requirements, IPOs can provide substantial returns by allowing investors to sell shares publicly.

- **Management Buyout (MBO):** The existing management team buys the investor’s shares, enabling a smooth transition and exit for angels while keeping the business operational under familiar leadership.

- **Secondary market sales:** Angel investors may sell their shares to other investors on private secondary markets, offering liquidity without waiting for an IPO or acquisition.

- **Buyback by the company or founders:** The company or founders may repurchase shares from angel investors, providing a straightforward exit option.

- **Mergers:** Combining with another company can create value and provide an exit route for investors.

Angel investors want a clearly defined exit strategy from the start, identifying potential buyers or exit routes, which helps them assess the investment’s return potential and timeline.
They typically expect an exit within a few years and prefer strategies that maximize their financial return while aligning with the company’s growth and operational plans.

In summary, angel investors in service businesses prefer exits via acquisition, IPO, management buyouts, secondary sales, buybacks, or mergers, with a strong emphasis on having a strategic, well-planned exit roadmap to ensure liquidity and returns.

Citations:
[1] How to Prepare a Business Exit Strategy that Attracts Investors https://www.pitchdrive.com/academy/how-to-prepare-a-business-exit-strategy-that-attracts-investors