‘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”.
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.