Invested Investor Thoughts: A successful exit

As regular readers know, I am primarily motivated by enjoying and assisting many entrepreneurial journeys. However, angel investing would not be financially sustainable, which is a useful attribute for most things in life, if we didn't at least break-even.

For a few that means a reliable dividend income, but all invested investors need to have exits. This involves a liquidity event, where cash and/or shares in the acquirer is returned to the shareholders.
This is hopefully more than was invested and, for me, usually partly underwritten in the UK by tax reliefs. As you may know, I believe that an investment should be written off immediately on writing the cheque, so even a return of less than 1X can be celebrated.
Let’s have a look at how various types of shareholders react to a successful exit.

Entrepreneurs
A positive exit usually leads to a huge sigh of relief, not just because the exit process is extremely stressful but also may be a life-changing event. Both in terms of becoming financially independent and the new role, whether employed by the acquirer or as someone unemployed and possibly unemployable.  However, I have met a few exited entrepreneurs who have had regrets. Either because they were enjoying the entrepreneurial journey so much that they didn’t want to stop or that the exit was too soon, and they feel they haven’t achieved whatever goal was driving them.

Staff
This is a time of uncertainty as the new owner may have a very different strategy. On the upside, if they had options, they will receive a nice sum of money from a few thousand to a few million.  It would be a very rare exit where the staff are not a key part of the acquisition.

Angel investors
A time for celebration. The long wait, the highs and lows of the journey, several decisions whether to follow one’s money or not, has led to a cash return which is unlikely to be life changing but is nevertheless very satisfying.  One feels one has chosen the right jockey (jockeys, but that ruins the analogy), has helped win the race and now has the cash to re-invest.

This is more complicated if the angel either has been issued quoted shares (when to sell etc) or can/must retain some shares in the acquirer. This results in further time and risk to exit, although the second exit may be much bigger than the first one.

When I have been on the board, I also have a tinge of sadness as I will invariably have enjoyed working with and learning from the entrepreneurs and senior team.

VCs
The celebration here will depend on the quantum of return.  VCs are generally keener on larger exits than angels, as that improves their brand and contributes more to their investors (LPs).
 
And how about me?
I’ve had 6 positive exits to date, none house or life-changing, although a couple would have allowed me to change my car.
One was financial, driven by customer traction and profits. The others were exits based on the team and Intellectual Property (IP).

And the future?
One of my investments is appointing advisors and moving towards an exit, which could lead to a 100X multiple on my investment and push me into the comfortable position of having repaid all my investing to date.  And that will have taken me only a decade to get there!

Of course, during that exit, several of my investments will fail!

I still have over 50 investments and many years of exciting times ahead.

I do love being an angel investor.

Peter Cowley

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