The Exit Strategy Nobody Planned

“Why do we need exit clauses? We’re just starting!”

That’s what one founder said until his co-founder decided to leave after just 18 months.

With no exit mechanism in place, what followed was chaos: 6 months of stalled negotiations, investors questioning management stability, operations on hold, and nearly INR 5 lakhs spent on legal costs.

This happens more often than founders expect. Without an exit framework, a business is left vulnerable to disputes over equity, control, and intellectual property.

What should an exit clause cover?

• Vesting schedules — How and when, and in what proportions equity may be vested.

• Exit Mechanism — Terms determining how can a founder take an exit from the company.

• Non-compete clauses — Reasonable restrictions to protect business continuity.

• IP assignment — Ensuring that all valuable codes, designs, content, and innovations created by a departing founder remains with the company.

Takeaway:

Plan your exit before you need it. A well-drafted exit clause safeguards the company, reassures investors, and protects founders, whether staying or leaving.