In the high-stakes world of venture capital, startup exits are often painted in black-and-white terms: a fire sale below $30 million spells failure, while a blockbuster over $1 billion lights up the scoreboard. But what about the murky middle ground of $150 million to $300 million?
Dubbed the "awkward turtle" by investors like CJ Reimel of Mostly Metrics, these mid-sized deals create tension on the cap table, where founders celebrate life-changing payouts, early backers pocket solid multiples, and later-stage investors often walk away with underwhelming returns — or even losses.
This misalignment stems from the venture model's power-law dynamics, where funds rely on a handful of outsized wins to offset the inevitable flops.
Drawing from recent analyses and real-world examples, this article explores why these exits frustrate VCs and offers practical advice for founders navigating potential sales.
The VC Portfolio Paradox: Winners Take All
Venture capital isn't about steady gains; it's a hits-driven business where 80-90% of returns come from just 10-20% of investments, according to benchmarks from Cambridge Associates and PitchBook.
Funds typically aim for 3x to 5x net returns overall, requiring individual bets to deliver 10x or more to compensate for the zeros.
As one Quora contributor notes, VCs implicitly target 20-25% internal rates of return (IRR) on their portfolios, far exceeding traditional investments like stocks or bonds. In this context, a $150M-$300M exit often falls short for growth-stage backers who entered at higher valuations, expecting unicorn-scale outcomes.
Consider a hypothetical startup that raises $100 million across rounds and sells for $200 million — a seemingly respectable outcome.
Breaking it down:
- Seed round: $10M at a low valuation, diluted to ~15% ownership. At exit, this yields ~$30M (3x return).
- Series A: $20M, diluted to ~10%, returning ~$20M (1x, breakeven).
- Growth round: $50M for ~10%, but with liquidation preferences (contractual rights ensuring investors get paid first), they recoup $50M (1x) before others dip into the pot.
Late investors? They break even at best, but in a fund context, that's a "wasted bullet," as Reimel puts it. PitchBook data from 2025 shows that mid-market exits like these deliver average multiples of 1.5x to 2.5x for late-stage funds, far below the 5x+ needed to drive fund-level success.
Real-world stats underscore the issue. In 2025, the median U.S. VC exit size hovered around $200 million, per NVCA reports, but only 15% of deals exceeded $1 billion — down from 20% in 2021's bull market.
For funds raised post-2020, which often deployed at inflated valuations, these mid-tier outcomes mean subpar IRRs. A LinkedIn analysis of dilution paths illustrates: an early investor starting with 5% might end at 2-2.5% after multiple rounds. At a $1B exit, that's $20-25M (potentially 1x the fund); at $5B, it jumps to 5-6x. But at $200M? Barely a blip.
Liquidation preferences amplify the awkwardness. These "pref stacks" prioritize payouts, often 1x or 2x the investment, protecting later investors in down scenarios but capping upside for earlier ones in middling exits. As detailed in venture strategy guides, prefs can turn a $200M sale into a zero-sum game, where growth equity providers demand their full return, leaving scraps for the rest.
Founder Wins vs. Investor Optics
For founders, a $150M-$300M exit can be transformative. Holding 20-30% post-dilution, they might net $30M-$90M — enough to retire comfortably, as Reimel notes, especially after years of bootstrapping or low salaries.
Early angels and seed funds, entering cheap, often score 5x-10x. But growth investors, betting on $1B+ trajectories, see it as a missed opportunity. "They could have deployed that capital somewhere else," Reimel explains, highlighting the opportunity cost in a competitive VC landscape.
This tension manifests in delayed approvals or boardroom drama. In one anecdote, a founder rejected a $100M offer, raised more, and sold at $300M with diluted stakes—netting less personally amid higher risks. Broader data from 2025 shows VCs pushed 40% more portfolio companies toward growth rounds despite market headwinds, per CB Insights, often inflating valuations and setting up for these awkward middles.
Advice for Founders: Navigating the Turtle Trap
Founders shouldn't chase unicorns blindly.
Here are refined strategies, bolstered by industry insights:
- Master Investor Economics: Before signing term sheets, quiz VCs on their fund math — e.g., required multiples (often 10x+ per deal) and portfolio construction. As Reimel advises, understand their "success metrics" to align on realistic exits. Tools like Carta's cap table simulators can model scenarios.
- Time Your Exit Wisely: Weigh 50% of $100M now versus 25% of a riskier $400M later. PitchBook reports show that 60% of startups raising beyond Series B in 2025 faced down rounds or flat exits, underscoring the dilution drag. If your company hits $100M-$250M enterprise value on seed capital, consider selling to avoid the "mid-market trap."
- Leverage Secondaries for Liquidity: Sell 5-10% of your holdings (not company shares) during up rounds like Series B. This derisks without alienating investors, who understand a "sated founder" performs better. In 2025, secondary sales hit record $120 billion, per Forge Global, helping founders cover taxes and build wealth incrementally.
- Explore Alternatives to Traditional VC: Bootstrap or use "seed strapping" (minimal early funding). Models like Centre Street Partners' "anchored ETA" blend VC with buyouts for mid-market plays, targeting $300M-$700M outcomes without unicorn pressure. Or, as in European VC successes like Atomico, focus on sustainable paths yielding 20+ exits without billion-dollar mandates.
Additional tips: Negotiate participating preferences sparingly to preserve upside, and build option pools strategically to minimize dilution. Monitor macro trends — 2025's rising interest rates squeezed growth multiples, making mid-exits more common but no less awkward.
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In sum, the "awkward turtle" exposes VC's inherent tensions: founders seek security, while investors hunt home runs. By prioritizing alignment and optionality, entrepreneurs can turn potential pitfalls into prudent wins, proving that not every startup needs to be a unicorn to succeed.
