Exit Strategies for Angel Investors – presented to the Northwest Energy Angels in Seattle, September 11, 2009
The Northwest Energy Angels invited me to Seattle to discuss exit strategies for Angel Investors.
- Organized angel investing is still quite new – only ten or twelve years old.
- Successful investing requires two things – buying right and exiting well.
- The big ‘new story’ is the large number of small and medium size exits.
- The ideal size for big companies to acquire is $10 to 30 million.
- Companies are being acquired earlier and earlier – often just 2 years from startup.
- Venture Capital in North America is in crisis – big funds aren’t working anymore.
- Traditional Venture Capital funds have grown too large for today’s exits.
- We now have a much better idea of the differences between traditional Venture Capitalists and Angel Investors.
- The most important differences relate to the exit – the minimum investment size, minimum return required and acceptable time to exit.
- If a VC follows on it will add about ten years to the exit.
- Fascinating new data from the bankrupt law firm Brobeck,
- Shows that “outcomes are inferior when angels and VCs co-invest”.
- Angels alone are “as likely as the VC backed firms to have successful liquidity events”.
- The optimum strategy is ‘Angels or VCs but not both’.
- Checklist to determine whether an individual company should be financed with Angels only or VCs.
- Secondary markets – how can angels and entrepreneurs get liquidity prior to an M&A transaction?
- Question about whether entrepreneurs need Venture Capital investors for their relationships with the M&A buyers?
- Why do you keep saying ‘traditional’ Venture Capital – is there a new type of venture capital coming?
- Venture Capital investors are always saying they add more value – is that true?
- When the IPO market returns will there be pressure to go back to the ‘old’ model?
- How is investing in tech different from investing in cleantech or life sciences?
- How are Canadian entrepreneurs and companies different from American ones?
Many of these lessons are described in my new book on selling businesses for entrepreneurs and angel investors – www.Early-Exits.com.