This is too often, unfortunately, true. Startup companies take a long time to mature into middle market businesses that large companies are interested in acquiring. Everything takes longer in a startup – from building up a base of engage clients to replacing your laptop when it breaks down.
VentureSouth has several portfolio companies in its portfolio that are past the “3-5 years” that is our target “hold period.” Other nearby funds are still working on companies they invested in during the early 2000s. (This is not necessarily bad. The “home run” multiples in the angel returns studies take a long time to come to fruition!) But no-one has infinite patience, and we have to prove that returns can occur before the investments are inherited by our children.
And we have done that. The average investment time for the successful exits from the VentureSouth portfolio is 1.6 years. Our shortest was 3x our investment in 3 months (a 2800% IRR). So if you set out to invest in companies with a 3-5 year plan and the capacity for an “early exit,” get management and investors aligned towards that, and give companies the tools, processes, and advice to execute them, you can get capital returns in a reasonable time frame.