‘Exit Early – Exit Often’ Keynote Speech
Keynote at the Capital Connects! Southeastern Regional Angel Capital Association Meeting, Greensboro, North Carolina – October 1, 2009
Highlights of the ‘Exit Early – Exit Often’ Video – Part 2:
- Traditional Venture Capital in ‘crisis’ and I think the industry could shrink to half, or even a quarter, of it’s current size.
- The average US Venture Capital fund has grown to $350 million in size.
- Each VC principal now has to invest an average of $30 million up from about $3 million in 1980.
- In 1996, the average amount VCs invested in an acquired company was about $5 million – today that is $25 million.
- For a VC fund to work, each successful company has to produce an average 30x return.
- In the past, most of these big exits were NASDAQ IPOs. But those haven’t been happening often for almost a decade.
- 92% of M&A exits don’t work for these traditional VC funds – but they all work well for Angels and entrepreneurs.
- The median time from when VCs invest to exit was just 2 or 3 years less than a decade ago – now it’s almost 7 years.
- For Angels and entrepreneurs, that means that if a VC makes an investment, it will add about ten years to the exit.
- So Angels and Entrepreneurs have a choice – an exit in 3 to 5 years without VCs or 10 to 14 years with VC investment.
- The first large scale survey of Angel investments by Rob Wiltbank shows that if VCs invest, failures increase and 1 to 5x exits decrease.
- Fascinating new research on the data from the bankrupt Brobeck law firm – including 182 Series-A VC and angel investments,
- Shows that “outcomes are inferior when angels and VCs co-invest” – it turns out angels and VCs aren’t that compatible.
- Angels alone are “as likely as the VC backed firms to have successful liquidity events”.
Part 3 of this video is online here.
Many of the lessons I’ve learned are described in my new book on exit strategies for entrepreneurs and angel investors – www.Early-Exits.com.
