When you’re at the helm of a struggling startup, facing the possibility of a sub-optimal exit can feel like standing at the edge of a cliff. Fear begins to creep in, especially when you think about how your investors might react. But often, that fear doesn’t align with reality. Let’s break it down.

Fear: Investors will push you to keep negotiating for a better deal.
The idea of being pressured to secure a slightly better outcome—maybe $.30 on the dollar instead of $.20—can seem daunting.
Reality: Experienced investors know their time is better spent elsewhere.
Their focus is on rocket ships, the startups that have the potential to take off. The marginal difference in returns on a struggling company won’t move the needle for them.

Fear: Investors will be angry and frustrated that things didn’t work out.
You might worry that the failure will result in harsh criticism or personal disappointment.
Reality: Disappointment is natural, but anger isn’t.
Seasoned investors understand that not every venture succeeds. While they’ll share your disappointment, they’ve seen this before and will likely take it in stride.

Fear: Offering retention packages to employees will seem like self-dealing.
There’s concern that providing incentives to employees in the transition phase might look like you’re playing favorites.
Reality: Retention packages are key to making any deal happen.
Without these incentives, the chances of closing a deal drop significantly. Investors know this and will recognize the necessity.

Fear: If the deal is really bad, they might prefer shutting down the company.
You could be haunted by the idea that a bad exit isn’t worth pursuing.
Reality: Wind-downs are a worst-case scenario for everyone.
Even a small exit shows your team, LPs, and the broader community that you gave it your all, signaling that everyone did their best in a tough situation.

Bottom line: If your investors have been supportive up to this point, they’ll continue to help you land softly. Their experience and pragmatism will guide the way, not fear or frustration.