Start at the End – Your Exit Strategy – presented at the 2009 New Ventures BC Seminar Series
Why every company needs a clear exit strategy right from the beginning
This was the final seminar in the 2009 New Ventures BC Seminar Series.
- Your exit is the culmination of all the hard work you do as an entrepreneur.
- Investors are easy to understand – we think of your company as a simple black box.
- The truth about investors – we are a pain in the a__s!
- The big new story is the large number of smaller M&A transactions.
- How big companies grow. Why this is exceptionally good news for entrepreneurs.
- M&A exits are happening earlier than ever before.
- You don’t need to grow your company to any specific size before you sell it – it doesn’t even have to be profitable.
- All you need to do before you can sell is to ‘prove the model’.
- The best time to sell is probably earlier than you think.
- Please don’t make the mistake I did – don’t “ride it over the top” and wait too long.
- Do you even need investors to make it big today?
- Why this is a golden era for entrepreneurs.
- The whole game for entrepreneurs has changed – very valuable companies are being built for $tens of thousands.
- Why your first choice should be to bootstrap if you possibly can.
- If you really do need capital, what are your options?
- The classic view of the venture capital industry and what it looks like today.
- The new phenomena of angel funds.
- Angel group syndication – angel groups are now investing as much as $5 to 10 million in some companies.
- Angels finance 27 times more startups than traditional Venture Capital funds.
- Angel investors invest about the same amount as traditional Venture Capital funds – about $20 billion in the US.
- Friends and Family investors invest much more than angels or VC funds.
- There is no shortage of capital today – despite what you might have heard.
- Why you need an exit strategy right from the beginning – and certainly before you contact your first prospective investor.
- Why entrepreneurs should “start at the end” when they build their companies.
- How a mistake with DNA compatibility can be fatal and how I almost lost my first company to the VCs.
- Developing an exit strategy – the most important element in your business plan.
- The exit is just another business process – like a sales plan, financing plan or product development plan.
- Exit strategies can be very simple – often just a few sentences.
- The important thing is to formally check the alignment – at least annually.
- New understandings on the differences between angel investors and traditional Venture Capital funds.
- The most important differences are all related to the exit.
- Accepting money from a traditional Venture Capital fund adds about a decade to the exit timeline.
- The unwritten contract between entrepreneurs and traditional Venture Capital investors.
- The Unintentional Moonshot – 92% of exits don’t work for traditional Venture Capital funds.
- In the 1990s the time from VC investment to exit was only 2 or 3 years.
- Today, the median time from when a VC invests to an exit is about 7 years.
- But that actually means, that on average, you will be stuck in your company for about 12 years after the VCs invest.
- This means entrepreneurs and angel investors have two choices:
- angel investors and an exit in 3 to 5 years, or
traditional Venture Capital funds and an exit in 10 to 14 years
- Why angel investors are much better aligned with entrepreneurs than traditional (big) Venture Capital funds.
- New research shows that when Angels and VCs invest together it doesn’t work out as well.
- Companies backed by angels alone are just as likely to have successful exits as VC backed firms.
- Statistically, entrepreneurs should pick angels or VCs – but not both.
- Checklist to determine whether your company would be better off financed by angels or VCs.
- Conclusions for entrepreneurs and your optimum strategy for success.
Many of these lessons are described in my new book on selling businesses for entrepreneurs and angel investors – www.Early-Exits.com.