Exit Strategies & Worst-Case Wind‑Down: Angel Syndicate Playbook

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Exit Strategies & Worst-Case Wind‑Down: Angel Syndicate Playbook

A. Common Exit Paths (Best to Normal Cases)
  1. Secondary Sale: Sell your stake to new investors in later rounds. Needs ROFR/Tag-along clauses in place.
  2. M&A: Company gets acquired; proceeds distributed per liquidation prefs.
  3. IPO: Sell after lock-up. Mind timing, volume limits.
  4. Buyback / Redemption: Company/founders repurchase shares on a formula. Terms must define price/terms clearly.
  5. Dividends / Revenue Share: Rare in early-stage, but possible with cashflow-positive startups; define formula upfront.


B. Worst Case: Company Dead / No Liquidity — Wind‑Down SOP
  1. Trigger Events: Shut down, capital exhausted, fraud, founders disappear.
  2. Data Collection: Get final balance sheet, debt list; lawyer/CPA if needed.
  3. Investor Notice: Send “loss/write-off notice” showing invested amount, current value (=0), expected recovery (=0).
  4. Legal Steps: If formal liquidation/bankruptcy, file claims even if recovery is unlikely; decide on litigation (cost-benefit).
  5. Tax Treatment: Recognize capital loss per local laws; consult CPA.
  6. Accounting Closeout: Close SPV accounts; return any leftover cash pro rata; dissolve SPV (tax & filings).
  7. Document Archiving: Keep contracts, memos, notices for 5–7 years.
  8. Internal Postmortem: What failed? Improve DD/terms next time.
  9. Member Comms: Pre-templatized announcement; remind high-risk nature.
  10. Insurance Claim (if any): Check D&O/E&O coverage for legal costs.

C. “Even Worse” Situations
  • Founder ghosting / withholding info: Send certified letters via lawyer; decide if litigation is worth it.
  • Investor internal conflict: Charter should define voting & cost-sharing for legal actions.
  • No money to close the SPV: Pre-reserve a wind‑down fee or “operations reserve” so you’re not passing the hat at the end.


Put These Clauses in from Day One
  • Liquidation Preference
  • Tag-along / ROFR
  • Drag-along
  • Information Rights
  • Breach / Non-cooperation remedies
  • SPV/partnership dissolution & cost-sharing terms


  • Secondary sale, M&A, IPO, buyback, dividends
  • Wind‑down SOP: trigger → data → notice → legal → tax → close → archive → postmortem → comms → insurance
  • Clauses: Liq pref, Tag/ROFR, Drag, Info rights, breach handling, SPV dissolution
 
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