Nothing goes on forever. At some point, entrepreneurs will want to free themselves from their startup and seek to cash in as well. So they need an exit strategy.
It is a strategic plan for investors and founders to monetize the company either by putting it up for a merger, a buyout, or an IPO. Either way, the final desired outcome of an exit strategy is to make a substantial profit.
Think of a car you own. If you are tired of it, or it has outlived its usefulness you might be planning to dispose of it. But most importantly you’d like to earn some cash from it, so you put it up for sale. That’s like planning your exit strategy for your startup.
Other interesting terms…