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Lessons from our community webinar with Alex Florea — 25-year M&A veteran, ex-private equity, now at Hive Founders.
Most angel investors don't think about exits early enough.
We say "exit" like it's something that happens at the end — a finish line we'll worry about when we get there. But the angels with the best portfolios don't treat it that way. They start with the exit in mind, on day one, before the wire even goes out. They know that as a minority investor, your ability to influence what happens later is limited. So the work has to happen up front.
That was the through-line of our recent LUMUS webinar with Alex Florea, who spent 25 years in M&A — first as a corporate lawyer doing privatisations across Central and Eastern Europe, then on the buy-side at a private equity fund, and now supporting women founders and investors at Hive. She walked us through what an exit actually looks like from an angel's seat — and what we should be doing long before we get there.
Here's what we took away.
1. The worst deals aren't the ones that fail. They're the zombies.
Everyone talks about the risk of a startup going bust. Fewer people talk about the risk Alex flagged: companies that don't die but don't go anywhere. The founders pay themselves a comfortable salary. The business ticks along. There's no exit, no dividend, no liquidity event — and you're stuck.
She told the story of a UK angel investor with several of these in his portfolio. Five years in, the founders are fine. He hasn't seen a dime. He can't even get his tax deduction. It's not a disaster. It's something worse — it's nothing.
You can't always spot zombies in advance. But you can probe. The single most important due-diligence question is rarely about the product or the market. It's about the founder: do they understand that they will need to give their investors a path to liquidity? Many founders genuinely don't. They're in love with the company. The mechanics of exits aren't on their radar. As an angel, that's something you need to surface — early, gently, and seriously.
2. Plan for what could go wrong, not what could go right.
The typical angel hold is five to ten years. The earlier the stage, the longer the ride. Over that time, Alex says things tend to go wrong in three places: money, control, and conflict of interest.
Most of these conflicts are cheaper to prevent than to fix. The prevention happens in the term sheet — the short, non-binding summary of what the deal looks like before there's an actual contract. If you're investing through a syndicate or a crowdfunding round, you probably can't change the terms. But you can read them. And you should.
3. The term-sheet clauses every angel should be able to spot.
Term sheets aren't as jargon-heavy as full contracts. With a careful read, an Excel sheet, and a couple of worked examples, you can decode them. Here are the four areas worth knowing cold.
Lock-ins and liquidity. An angel investment is one of the least liquid asset classes you can own. In some cases there's a path to a "secondary" sale — selling your shares to another investor before the company exits. That path closes if your term sheet has a lock-in clause forcing shareholders to hold for a fixed period. Read for it.
Dilution and pre-emption rights. When new money comes in, your percentage shrinks. That's not necessarily bad — your piece of a bigger pie can still be worth more. But you want the right to participate in future rounds and maintain your stake, even if you don't have the cash to use it today. Look for a "pre-emption" or "participation" right. Don't conflate "I can't afford to follow on" with "I shouldn't have the option to."
Liquidity preferences. This is the one most angels underestimate. VCs almost never take ordinary shares — they take a preferred instrument that gives them their money back first in any sale or liquidation. So if a company is sold for less than the VC hoped, the VC gets repaid before the founders and angels share what's left. A 1× non-participating preference is standard. A 1.5× preference is cheeky. A participating preference — where the VC takes their money back AND shares in the upside — is, in Alex's words, "obnoxious." European VCs don't tend to push for participating preferences as often, but read every term sheet anyway. And if you're close to the founder, walk them through what they're signing. They may not realise.
Tag-along and drag-along rights. A drag-along lets the majority shareholder force you to sell when they sell — same buyer, same terms. You probably can't avoid it; buyers want clean 100% deals. What you must have alongside it is a tag-along: the right to come along when they sell, on the same terms. Drag without tag is a trap.
4. Your real power is soft, not hard.
One of our members asked Alex a sharp question on the call: are there contractual ways to force a path to liquidity — exit triggers, KPI-based buyouts, anything?
Alex's answer was honest. Not really. Even private-equity funds with minority stakes have to fight for the right to force a sale. As an angel writing a small cheque, you almost certainly won't get that.
But — and this is the point — your influence isn't legal. It's relational. A "smart money" angel who reads the term sheets, who understands what motivates a private-equity buyer, who can sit with the founder and translate the M&A market into something they can plan around — that angel ends up shaping more than their cap-table percentage suggests. Hard rights belong to the VCs. Soft power is yours to build.
5. M&A is cyclical. So is the wisdom about it.
Forget the company for a second. The M&A market itself moves in waves — bubbles, crashes, dry spells, frenzies. There are good years to sell and bad years to sell, and it has very little to do with how the company is doing.
The other shift worth knowing about: the rise of dry powder. That's the money private-equity funds have committed but haven't yet spent. The pile has been growing. And because PE funds must deploy that capital, they're competing harder than ever for the same set of decent companies — which has pushed up valuations.
The old wisdom said strategic buyers (companies in your sector, looking for synergies) always paid more than financial buyers (PE funds, looking for a 2.5–3× return in five years). That's no longer reliably true. Strategics still tend to win in the lower mid-market — they can see synergies a PE fund can't model. But at the top end, PE has been paying full prices because it has to. As angels, we should drop the assumption that "strategic always wins" and look at each situation on its own.
6. Exit readiness is about three things, and the founder is one of them.
Before you push for a sale, Alex says, ask whether the company is actually ready. She breaks readiness into three buckets.
Founder readiness. Most acquirers won't let the founder walk. In her PE career, Alex's fund would buy 60%, never 100%, and the founder stayed for the journey to the next exit. If your founder wants to sell the yacht-and-disappear story, ask whether anyone will actually buy a company without them.
Business readiness. Startups are built for speed, not governance. Buyers will dig through your data room looking for reasons to discount the price. Getting the books in order, building a proper data room, tightening governance — this can take up to a year. It needs to start before anyone has approached the company.
Market readiness. Is the sector hot? Can you make it hotter? Is the broader environment a bidder's market or a wait-it-out year?
7. The IPO dream is mostly a dream.
We talk about IPOs because they're glamorous. Most exits are not IPOs. They are trade sales — the company gets bought.
A trade sale comes in two flavours. A competitive process invites multiple bidders to drive up the price through tension; the cost is months of disruption with several sets of advisors crawling through the company. A targeted process identifies one or two near-perfect buyers and engages with them directly; less disruption, sometimes less price. Neither is automatically right. As an angel, this is another moment where your perspective on the buyer landscape can genuinely help the founder choose.
8. Secondaries are real. Syndicates have a quiet advantage.
There's growing momentum around secondary markets — angels selling their stakes mid-journey. The UK recently passed legislation (the "Pisces" regime) that effectively lets companies go public for a single day so minority shareholders can sell, then go private again. It's early days, but the direction of travel is clear.
For most of us in continental Europe, secondaries still mostly happen for larger tickets, in companies that have generated enough heat to attract follow-on interest. They're rare for small angel cheques. But here's the underrated point Alex and Teresia landed on: investing through a syndicate gives you a built-in pool of potential secondary buyers. People who already know the company, have already done their diligence, already trust the founder. We've seen it inside LUMUS — one of our angels needed to exit early for personal reasons, and another member of the same syndicate stepped in. The transaction was clean because the trust was already there.
Another argument, if you needed one, for investing alongside people you'd want next to you in a hard moment.
What to do tomorrow
If you're newer to angel investing, start with one habit: when you're offered a deal, before you read the deck, ask yourself the exit question. Where does this company plausibly land in five to ten years? Who buys it? At what price? And does the founder think about it the same way?
If you can't get good answers, that's not a "no" — but it is a flag to dig.
Most of what makes a great angel isn't getting into the right deal. It's reading the room — the term sheet, the founder, the market — well enough that when the exit moment comes, you've already done the work.
That's what M&A looks like from the angel's seat.
This is not investment advice. This article is for educational purposes only.
