Any investors want to have a clear understanding of how you expect to provide them with a return on their investment. This may involve a public offering or other innovative mechanisms. Since the rate of return is their most important consideration and a public offering is sometime not an option, investors will be looking for a variety of exit strategies. The following are examples of some traditional ways for investors to realize a return on their investment.

• Dividends

• Investor redemption based on a pre-defined schedule

• Enterprise buyout of investors based on a pre-defined schedule

• Merger, Acquisition, IPO

• Convertible Note

Dividends

At some specified time following investment, the enterprise will pay to the investor a dividend. Dividends will likely be shared among investors on a pro rata basis. The amount of the dividend will normally be determined by the board of directors, but with some provision for limiting the amount.

Investor redemption based on a pre-defined schedule

At some specified time following investment investors would have the right to redeem their equity to the extent that the enterprise's cash ratio could be maintained at some specified level. If multiple investors wish to redeem their equity it would be done on a pro-rate basis. Redemption could be based on a specified schedule.

Enterprise buyout of investors based on a pre-defined schedule

At some specified time following investment the enterprise will have the right to buy back the investor's equity at a pre-determined price. Buy back could be based on a specified schedule.

Merger, Acquisition, IPO

In any of these circumstances it is not possible to predict what the return will be for the investor. It is assumed that any such action would be made in the best interest of the stockholders.

Convertible Note

An alternative to a direct investment is a loan from an investor. A specified interest rate would be defined with payments due at regular intervals over the term of the loan. The investor would have the option to convert the loan to a percentage interest in the enterprise for some pre-defined period of time (usually considerably less than the term of the loan).