Exit Early Exit Often Keynote Speech Part 2

BY Basil Peters

‘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.

Part 3 of this video is online here.