AngeBlog by Basil Peters

Examples of Exit Strategies

This post summarizes, and categorizes, examples of exit strategies discussed elsewhere in this blog.

Venture capitalists assert they have two possible exit strategies for their successful companies: an IPO or a sale.

Angel investors invest earlier, and have three possible outcomes for their successful portfolio companies.  From an Angel perspective, a company can either:

  1. Obtain financing from a venture capital fund,
  2. Be sold, or
  3. Go Public.

Today, in the latter part of 2008, tech IPOs are highly unlikely.  Fortunately, the tech M&A market is extremely active.

A much larger percentage of Angel-backed companies are being sold before they complete either a venture capital or IPO financing.

A combination of these factors has given entrepreneurs and Angel Investors a broader range of options than in any other time in history.

Many are realizing the conventional wisdom of building a company up through the friends and family financing, Angel financing, venture capital financing and then an exit is not only less and less likely to occur, but (in the majority of cases) is also far less desirable.

Today there are more and more examples of exit transactions where the companies have only received friends and family financing or angel financing.  Even more surprising, there are increasing numbers of companies that are being sold after only receiving financing from the founders - and some of these exits, like Club Penguin, have been enormously successful.

The table below categorizes the examples of exit strategies discussed elsewhere in this blog (or that will be discussed in future posts):

Example of Exit Strategies

Company

Notes

1. Friends and Family Financing

2. No Exit

- Plenty O Fish
- Airgames

These companies have excellent cash flows and the founders have no interest in an exit.

1. Friends and Family Financing

2. Exit

- Flickr
- Club Penguin

These companies were very successfully sold even before they received angel investment.

1. Friends and Family Financing

2. Angels

3. Exit

- Parasun
- Brightside

Excellent examples of exits under $30 million.

1. Friends and Family Financing

2. Angels

3. Public

4. Exit

- Hostopia

 

 

1. Friends and Family Financing

2. Angels

3. Venture Capital Series A

4. Exit

- Octiga Bay

 

 

1. Friends and Family Financing

2. Angels

3. Venture Capital Series A

4. Venture Capital Series B

5. Exit

Need an example