Yesterday, news broke that Flutterwave had acquired Mono to strengthen its payment infrastructure. The deal is rumoured to be between $25 million and $40 million, and Mono’s CEO, Abdulhamid Hassan, has stated the actual figure is significantly higher than the $17 million the startup has raised so far.
Beyond congratulations, the acquisition has sparked important conversations, including what makes a good exit. For one, the deal value remains undisclosed, a common pattern in the African tech ecosystem. As one investor once noted, when acquisition figures aren’t transparent, someone may not be getting a favourable deal.
However, without dwelling on whether Mono’s CEO will soon start a football club, it would be helpful to understand what a good exit looks like.
An acquisition, merger, or IPO — collectively called an exit — is how founders and investors convert their ownership in a startup into real value. A common mistake is to judge an exit solely by the headline figure. Paystack’s $200 million exit made headlines, but the reality of who benefited and by how much can be more nuanced.
So, what really defines a good exit for investors and founders alike?
Why exits matter
Until 2022, exits were rarely discussed by African investors, and one could be forgiven for thinking this wasn’t important. Then the zero-interest rate era came to an end, and investors became more discerning with capital. Limited partners (LPs) began asking the hard questions, and VCs began the search for exits.
Exits are the moment of truth for any startup investment. It’s the point at which potential becomes realised. For founders, investors, and early employees with stock options, an exit is how the equity they’ve built or invested in actually becomes cash. Without an exit, a company’s valuation is just a nice number on paper.
For investors, exits are a key measure of fund success. Venture capitalists invest with the expectation of high multiples on their initial capital, typically over a 5–to 12–year horizon. A successful exit enables them to return capital to limited partners and invest in new startups.
For founders, exits offer a combination of financial rewards and strategic opportunities. A well-planned exit can provide funds to start new ventures, invest in other startups, scale a business further under a larger partner, or achieve personal goals such as liquidity or a reduced operational burden.
Beyond individual or corporate gain, exits are important for the market, as they signal maturity. Frequent, successful exits attract more capital, inspire entrepreneurs, and validate a region’s tech ecosystem. Exits are what make the startup wheel go round.
A founder with a successful (and sizeable) exit makes a few investments in new startups; an early employee becomes an angel investor or retires early; an investor returns capital, which they can point to as proof of backing winners; and the government gets to earn tax on capital gains.
“Exits are how you close the loop,” Fola Ijaiya, an investment professional, shares with Techpoint Africa. “Money comes in; money needs to go back out. Otherwise you get a few comments here and there that this looks like a Ponzi scheme. Eventually people stop playing,” he added.
In simple terms, exits make the startup game worthwhile for everyone in the ecosystem.
Not all exits are created equal
No two exits — even when transaction numbers and industry are similar — are the same. For many in the African tech ecosystem, an exit is always a win. But for those who are honest enough to admit, whether in private or in public, that is rarely the case. In fact, as Ijaiya points out, “a lot of startup M&A is survival dressed up as strategy,” which explains some of the secrecy surrounding the numbers.
Another common misconception is applying Silicon Valley expectations to Africa consciously or unconsciously.
“In the Valley, you’re selling to the likes of a Google for 10x revenue in cash. Here you’re selling to another startup paying in stock, or some corporate offering 2x revenue if you’re lucky,” he notes.
There’s also the often complex calculation of preferences to consider. Who gets what, when, and in what order? Most cap tables are a maze of different types of equity, each with its own preferences. These preferences essentially determine the order in which investors get paid out when there’s a liquidity event. For instance, VCs often have liquidation preferences, which means they get their investment back, plus a multiple, before anything is distributed to common shareholders (typically the founders and employees).
The VCs might have a preference for a 2x return on their investment, meaning they’ll take their initial investment plus an additional 100% before the founders see a penny. This can quickly eat into the total payout. In some cases, founders could end up walking away with little or nothing beyond having sold their companies.
What makes a good exit for an investor?
A good exit would look different for each investor depending on factors such as the timing of their entry and exit, the size of their fund, and the size of their investment. But a general rule is that all VC investments are judged by the power law — a few investments providing most of your returns.
An angel investor without the LP obligations and the need to raise future funds that a VC must consider may be comfortable with a 3x to 5x return within five years. For a VC, the considerations are different.
“VCs need 3-5x minimum for growth funds, distributed as actual cash to LPs. Early stage needs some 10x outcomes to cover all the zeros. But it’s got to be cash returned, not paper markups. VCs get judged on DPI, and paper means nothing long-term, particularly if we still are using the 10+1+1 fund structure,” Ijaiya notes.
In an exit scenario, an angel may be satisfied with a 3x return, but a 1.5x return for a VC is considered bad news. Furthermore, timing plays a crucial role. A 3x return within three years is a better outcome than a 5x return after 10 years because the latter offers a lower internal rate of return (IRR).
What makes a good exit for a founder?
From a founder’s perspective, the ultimate determinant of success is how much money you get out of it. One founder may receive $40 million from a $100 million exit, while another may receive a $2 million payout. Similar sale value but different outcomes.
Obtaining stock options in a larger entity is beneficial, but having actual cash to spend on a luxurious beach house is even more important. As a wise man once said, an exit in hand is worth two in the bush. Stock value fluctuates, as many founders can attest to, and a really great stock today can lose value tomorrow.
A second consideration is the freedom an exit offers the founder. As Ijaiya notes, some sales bind a founder to the company for a few months to a few years. Not everyone is comfortable being an employee after many years of calling the shots, and it is essential to consider your personal preferences.
A third consideration is the value your team derives. Stock options are a great way to attract top-tier talent to startups, and being able to fulfil a promise you made feels good for founders.
“Did employees make life-changing money? Is your product still alive, serving customers? A lot of founders care deeply about this even if they don’t admit it upfront,” Ijaiya notes.
Finally, your reputation after an exit is crucial, especially if you plan on building a startup again. It helps you raise capital more easily and hire even more talented individuals because you have a proven track record.
“A messy exit where investors feel burnt follows you forever. Everyone can’t be Adam Neumann,” Ijaiya shares.
Does this make sense?
So what actually makes an exit a good one? The short answer is that you have to look beyond the press release and into the details that are rarely made public.
What percentage of the deal is in cash versus stock? How are common shares treated relative to preferred? Are earnouts realistic? Does the valuation closely match expectations, or is it lower? Does the acquirer have a proven track record of integrating companies without disrupting their operations? These details determine who really gets paid and when.
It’s also important to consider the alternative if the deal hadn’t happened. The startup may have run out of cash, raised a down round, or shut down. The alternative can often turn a bad exit into a more palatable one.
Crucially, the structure of what each party receives can determine how the deal ultimately plays out. An acquirer may walk away with technology it would have spent months or even years building, or with licences that instantly open doors to new markets.
Finally, there’s strategic fit. Does the acquisition actually make sense for both parties, customers, and the product, or is it just an attempt to save a dying business?
Ultimately, exits are not simply stories of success or failure. Often, they are tales of trade-offs, shaped as much by market conditions and timing as by strategy or execution.
