How to sell a startup: buyers, LOI, diligence, close

To sell a startup, build relationships with likely buyers a year or two before you want an offer, then run a short process with at least two bidders. Price and terms only move while a second buyer is live. Once you sign a letter of intent (LOI), you stop talking to anyone else, so negotiate exclusivity down toward 30 days; Orrick's M&A partners say it usually runs 30–60. Expect a large share of the price to arrive after closing. In SRS Acquiom's 2026 study of more than 2,300 private-target deals, 88% of 2025 deals held back part of the price in an escrow or holdback, and the median escrow on deals without deal insurance was 10% of the price. Not legal, tax, or investment advice.

This page covers the sale process from first buyer conversation to closing. For the liquidation preference waterfall that decides who gets paid, start with term sheet red flags. If one customer carries the revenue, read customer concentration risk first, because buyers move that risk into the earnout. If cash is the reason you are selling, use when runway runs out to weigh a sale against a bridge or a wind-down.

Know who buys startups and what they pay

Carta counted 502 acquisitions among US startups on its platform in the first half of 2025, about 1.2% of them. The rate by stage:

Excluding pre-seed, the rate is 2.1%. Peter Walker's caveat on the same data: Carta cannot see the outcome of each deal, and many early acquisitions are likely acquihires. The market has kept moving: Carta reports 421 M&A exits in the first half of 2026, up 16% year over year, and investors quoted in the same piece say a strong AI story now helps a company line up an exit.

SRS Acquiom's 2025 deals give the typical shape of a venture-backed sale. The median company sold 6.7 years after its first investment, after 3 equity rounds and $26M of equity raised. The median deal returned 3.3× the equity invested. There is no reliable public benchmark yet for sale price multiples at Seed to Series B; the SRS figures cover deals of all sizes. When the price does not clear the preferences, some deals set aside a slice for management; SRS found a management carveout in 4.3% of 2025 deals.

Build the buyer list before you need it

1984 Ventures' handbook sorts buyers into three groups, each with a different reason to pay:

The handbook puts the third group as the least obvious and sometimes the best outcome. It advises spending time with a CEO, GM, or other senior executive rather than corporate development, which executes deals but rarely starts them. Check what each buyer can afford: the same handbook says companies typically spend at most 1–2% of their market value on one acquisition, so a competitor worth $8B tops out around $100–150M.

Decide on a banker and know the fees

1984 Ventures says a banker adds most at Series C or later with more than $50M of ARR, when you are running a contested process, or when the deal needs heavy modeling. Earlier, or with one interested buyer you already know, a banker can signal that you are shopping the company. Either way, hire transaction counsel who closes M&A deals often.

Firmex's 2024–25 survey of 212 US middle-market advisors, mostly sell-side, gives the usual fee shape:

The most common monthly work fee was $5,000–10,000. Firmex notes the success fee is payable at closing, so ask how your banker's fee treats an earnout or escrow that may never arrive.

Get a second bid, then sign a short LOI

Most LOI terms are non-binding, but the letter sets price, structure, and an exclusivity period during which you cannot talk to other buyers. 1984 Ventures' advice on receiving one: get a second term sheet right away, and keep the first buyer's name confidential. Orrick's timeline, from its M&A partners Mark Seneca and Justin Yi:

In SRS Acquiom's 2025 data, 43% of deals signed and closed on the same day and 57% signed first and closed later. A US deal above $133.9M may need a Hart-Scott-Rodino filing with the FTC and Justice Department and a waiting period before close; the filing fee is $35,000 below $189.6M (FTC, 2026 thresholds in the Federal Register). Ask counsel early if your price is near that line.

Read each LOI term that moves cash: the payment at close, the escrow size and length, any earnout metric, the treatment of unvested employee equity, and retention packages for you and the team.

Price the escrow, the earnout, and the claims window

SRS Acquiom's 2026 Deal Terms Study on 2025 deals:

Illustrative arithmetic, not data from any deal. A buyer offers $40M at closing plus an earnout of up to $13.6M (the 34% median), with no deal insurance:

The headline reads $53.6M. Planning cash is $36M on day one, most of the $4M escrow a year later, and perhaps $2.9M of earnout. Fees come off the top, and preferred holders take their preferences before common. Run your own waterfall with counsel.

When a buyer buys deal insurance, the median escrow falls from 10% to 0.5%, so ask whether the buyer will buy a policy before you agree to a 10% escrow.

Keep the company running through diligence

1984 Ventures expects 4–8 weeks of intense work between the signed LOI and the final documents, from a missing contractor agreement to an open-source component the buyer wants removed. Its advice on people: early on, only a co-founder should know; later, the CFO and a handful of key people. Employees ask two questions when they hear: how much will I make, and is my job secure. Plan those answers before the announcement.

The VEN (Venture Executive Network) session judgment from founders who have sold: the business must keep hitting its numbers during diligence, because a missed month after the LOI becomes a reason to cut the price. Keep the Series A diligence checklist room current, and the buyer's requests arrive faster.

Not legal or tax advice. Approvals, escrow terms, tax treatment of the sale, and payments to executives depend on your charter and the deal; transaction counsel and a tax adviser should review the documents before you sign.

Mistakes that cost the deal

Waiting until cash is short. 1984 Ventures: with 3–6 months left, the result is a fire sale.

Signing the first LOI alone. Exclusivity removes your other options; get the second bid first.

Long exclusivity. Each extra week gives the buyer more time to find reasons to lower the price. Orrick advises sellers to push toward 30 days.

Counting the earnout at face value. Earnouts have paid about 21 cents per dollar (SRS Acquiom).

Pitching corporate development first. They run the paperwork; a business owner decides to buy (1984 Ventures).

Telling the whole company early. News spreads and work slows. Keep the group small until you sign.

Sources

• SRS Acquiom, 2026 M&A Deal Terms Study (PDF). More than 2,300 private-target deals closed 2020 through 2025. 2025: 88% with an escrow or holdback; median general escrow 10.0% of transaction value with no deal insurance identified, 0.5% with it; insurance identified on about 46%; median general survival 12 months; 43% signed and closed simultaneously, 57% signed then closed; median 6.7 years from first investment, 3 equity rounds, $26M equity invested; median return 3.3× equity invested; management carveout in 4.3% of deals; earnouts in 24% of non-life-sciences deals; median earnout potential 34% of the closing payment.
• SRS Acquiom, M&A Deals: Key Trends from the 2025 Deal Terms Study. Citing the 2024 M&A Claims Insights Report: earnouts paid about 21 cents on the dollar across deals with earnouts, excluding life sciences.
• Orrick, What's the Timeline for a Sale Process?. Mark Seneca and Justin Yi, 11 November 2024. LOI exclusivity usually 30–60 days; LOI to signed purchase agreement about 30–60 days; signing to closing as short as a week for private companies, months with HSR review; target 45 days, typically 60; sellers should push exclusivity toward 30.
• 1984 Ventures, How to Sell Your Startup (Founders Handbook). Ramy Adeeb. Bankers add value at Series C or later with more than $50M ARR or in a contested process; three buyer groups; build relationships a year or two ahead; 3–6 months of cash leads to a fire sale; senior executives over corporate development; buyers typically spend at most 1–2% of market cap, so $8B implies about $100–150M; get a second term sheet after an LOI; board and preferred approval after a priced round; 4–8 weeks of intense work before final documents; keep the circle small.
• Firmex, US M&A Fee Guide 2024–25 (PDF). Survey December 2024 to January 2025, 212 US advisors, 74% mainly sell-side. Success fees 5.7% at $5M, 4.0% at $20M, 2.4% at $100M, 2.1% at $150M; one-time engagement fee $26,000–50,000 credited against the success fee; most common monthly fee $5,000–10,000; success fee payable at closing.
• Peter Walker (Carta), 1.2% of startups on Carta were acquired in H1 2025. LinkedIn post, 12 September 2025. 502 US acquisitions; rate 1.2%, 2.1% excluding pre-seed; by stage pre-seed 138 of 26,114, Seed 113 of 6,485, Series A 150 of 6,006, Series B 54 of 2,673, Series C 29 of 1,142; deal outcomes not visible to Carta; early M&A likely includes many acquihires.
• Carta, For startups seeking an exit in 2026, AI-powered growth is the difference. Kevin Dowd, 3 August 2026. 421 M&A exits on Carta in H1 2026, up 16% year over year; a strong AI story helps line up an exit.
• Federal Trade Commission, 2026 HSR thresholds and filing fees, Federal Register notice (PDF). Federal Register Vol. 91, No. 11, 16 January 2026: adjusted minimum size of transaction $133.9M; filing fee $35,000 for transactions under $189.6M.
• VEN (Venture Executive Network). Founder sessions on exits, 2026. Keep hitting the plan through diligence because a miss after the LOI becomes a price cut. Not a survey. No closed-session numbers.

Related

• Fundraising
• Term sheet red flags
• Customer concentration risk
• Series A diligence checklist
• When runway runs out
• Venture debt
• SAFE dilution calculator
• QSBS for startup founders

Founders who have run a sale, or walked away from one, will pressure-test your buyer list, your letter of intent, and what you take home at close in a VEN session.

Go deeper: VEN playbook on running the exit process