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Early Exits

Early Exits in BC Startups

by Basil Peters on September 15, 2008 · 0 comments

Companies everywhere are being sold earlier and earlier. These days, acquisitions often happen before companies are two or three years old. Recent UBC research discovered that in British Columbia and Alberta, we are better at early exits than anywhere else in Canada or the US.

In my early-stage venture capital fund, The BC Tech Fund, I invested in nine companies. Three years after the first investment, three of the nine had a liquidity event – one went public and two were acquired. This is much faster than in typical venture capital portfolios. The way we accomplished those early exits is described here.

Early exits also boosted the returns in my new angel fund and provided our early investors a 100% return of their capital in just over two years.

Here are a few BC companies that have recently done early exits:

Club Penguin – is a Kelowna company that created an online world for 6 to 14 year olds. The company was founded in October 2005 and was sold to Disney in August 2007 – less than 2 years later – for $700 million ($350 million up front and another $350 million if they hit their projections.) The three founders were the only shareholders; there were no investors in the company.

Brightside – is a UBC spin-off that builds technology for brighter, and higher contrast, liquid crystal displays. I invested in this company three times. It was incorporated in 2002 and sold to Dolby Labs in February of 2007 for $28 million cash. This was about 5 years later, but the company was still pre-revenue and working on its first real production prototype. The Brightside story is fascinating. You can read what happened the behind the scenes here.

OctigaBay – was a Vancouver company, founded in 2001, that developed an innovative, high-performance computing system based on Linux and AMD processors. It was acquired by Cray in February 2004 for $115 million – three years after founding.

Flickr – was started in a Vancouver loft sometime after June 2003. I know the date because I still have the email from Stuart Butterfield who was trying hard to raise some angel money for his multiplayer online game called the Game Neverending. I first met Stuart at a talk I gave on building better boards. Shortly after, he pitched at the Vantec Angel forum. I really liked Stuart and wanted to invest, but I’m not a gamer and just never understood the fundamentals of that industry. Less than two years later another friend mentioned he was helping Stuart finish the legal work on selling Flickr to Yahoo for $30 million. Another friend of Stuart’s told me that no other investor understood his game either; so, in a fit of despondency one weekend he decided to build a photo-sharing app instead.

If you know of another early exit winner in BC that should be included on that page, please send me an email.

These are good examples of British Columbians being really good at early exits.

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