Exits

Executing Exits - "our" exits

We are bringing this Executing Exits workshop to the Carolinas for the first time because exits are so integral to angel investing, and so crucial to all the efforts aiming to develop our early stage community.

We’re also personally interested in the workshop, as "executing exits ourselves" has been an important part of our “prior lives.”

To blow our horns for three paragraphs, Mac has sold five companies himself – including KYCK.com to NBC Sports and Mountain Khakis to Remington. He is an exceptional resource to help companies create a long-term exit strategy – and execute it. Start with his blog here.

Paul began his career at NM Rothschild & Sons in London – one of the oldest, active, and most prestigious M&A advisory firms in Europe. He helped advise on sales of companies sold for in total almost $10 billion – including the largest sale of a chain of hospitals in the UK.

And under Matt’s stewardship VentureSouth’s investors have already seen 9 investment rounds fully exited (and 11 more partially exited). You can see a list of these exits on our portfolio page.

VentureSouth’s exits have included some stellar returns – including several returns above our target 50% IRR.* In aggregate they have generated a 1.4x return, and quickly enough to create an IRR overall of 60%. These have ranged from one at 6% IRR (not amazing, though still beating those indices) to one at 2817% IRR (amazing). Please refer more of those to us!

But even with this long expertise and positive track record, we have plenty more learning to do. We have several companies that are not as close to reaching an exit as they could have been by now. How can investors encourage / cajole / help / compel their portfolio companies to drive to an exit? Perhaps this workshop is the first step.

*IRR = Internal Rate of Return = an annual rate of return. 50% IRR compares to around 7% annual return from owning public equities.

Executing Exits - who should come?

After the first post about exits, a few people asked who should attend the Executing Exits workshop next week.

Essentially, everyone:

Investors

·       An angel investor – obviously – whether in our groups, another group, or a “lone wolf”

·       Anyone who works for a VC or PE fund – exits are your livelihood too

·       And anyway that’s been a “friends and family” investor in a company

Entrepreneurs

·       Angel-funded companies including our portfolio companies

·       Entrepreneurs who will be looking to raise angel or VC funding

·       More widely, any entrepreneur should find this valuable. Assuming you are not planning to live and operate your business forever, you need an “exit plan.” Whether that is today, in the next 3-5 years, or in 20 years when you hand over to the next generation, understanding how to “execute” your exit can mean the difference between a quiet wind-down and a stellar payday.

Ecosystem partners

·       M&A advisory providers – always good to get more education.

·       Incubators and accelerators seeking to prepare their companies for success.

·       Bankers. Knowing how businesses are sold, from the entrepreneurs’ perspective, may help learning

·       Economic development efforts. Though it might not seem like it, acquisitions are often the best way of generating real growth for home-grown companies

Potential acquirers

·       Anyone running a business that might be looking to grow through acquisition. Useful to know how the “other side” is approaching this transaction.

Who have I missed? See you there.

Shark Bites and Angel Exits

Read Managing Director Matt Dunbar's article in the Upstate Business Journal here.

Shark Bites and Angel Exits 

If you like sports or technology or reality TV, you are probably familiar with Mark Cuban, the outspoken owner of the Dallas Mavericks, the cofounder of Broadcast.com (which sold to Yahoo! for nearly $6 billion in 1999), and one of the stars of the popular show “Shark Tank.”

Cuban is colorful and brash, and he doesn’t hesitate to hurl inflammatory comments at those he disagrees with – from entrepreneurs to NBA officials to the Securities and Exchange Commission (against which he successfully defended himself in a recent insider-trading case). But beneath the bravado, Cuban is a talented entrepreneur and savvy investor with a knack for cutting through fluff and extracting valuable business insights.

In a blog post last week, Cuban directed some of his colorful commentary at Silicon Valley, pointing out elements of a current bubble-like environment for startup valuations in the technology epicenter of the world. However, he ultimately concludes there is no bubble – not because of where the valuations start, but where they end.

“Startup capital is not their secret sauce,” Cuban wrote. “What Silicon Valley does better than anyone is create exits. They know how to get people who they have made money for to turn over a lot of that money to buy the companies they have invested in. … So if you want your new tech corridor to play in the big leagues with Silicon Valley and its VCs, don’t stress about capital for entrepreneurs to create companies. Stress about capital that will provide exits for companies.”

Of course, it certainly helps to have plenty of available capital to start companies in the first place, but his point is an insightful one. He goes on to say, “It doesn’t have to be billion-dollar exits. Millions. Tens of millions. Small IPOs. If you can help enough companies get to capital that takes them to the big leagues or gives them an exit, it will be like financial gravity. It will pull entrepreneurs to you. … Brag about the exits and how there is capital waiting for amazing entrepreneurs to reach their goals.”

At the Upstate Carolina Angel Network, we very much want to help pull entrepreneurs into South Carolina – so we agree that it makes good sense to focus on exits we can brag about to entrepreneurs and investors as evidence that startups can be successful here. Fortunately, UCAN has several portfolio companies poised for exits in 2014 and 2015 – with three currently in highly active merger or acquisition discussions – so we will soon see these exits add to the gravitational pull for entrepreneurs in our state.

Since the acquisitions are in still in process we can’t reveal all the details, but one transaction that was made public last week is the pursuit of Selah Genomics by EKF Diagnostics out of the U.K. The proposed transaction will provide a substantial return on investment to local investors while providing the company with greater resources to attract talent and continue building their fast-growing business. Michael Bolick, CEO of Selah Genomics, has been a longstanding champion for entrepreneurship in South Carolina, and his company’s successful exit will add significant mass and momentum to the startup nucleus here.

The two other active UCAN exits involve companies that are not located here, but the capital that will be generated from those transactions will come back home to the Upstate, available to be deployed in other promising companies that take root here because they see increasing opportunities here for “amazing entrepreneurs to reach their goals,” to borrow Cuban’s phrase.

Of course, these exits also come with practical implications that sometimes cause concern in discussions about local economic growth. If these startups are sold to bigger companies located elsewhere, it is often unavoidable that at least some of the capital, talent and community support that comes with local headquarters may be diluted or expatriated – at least for a time. However, these exits ultimately generate financial capital, intellectual capital and brand value for our state and region that can be recycled into the next generation of startups that will gravitate here to build on the know-how, capital and reputation of previous exits to build even bigger and stronger companies in the future.

Over the long term, exits provide the key push it takes to turn the flywheel on a sustainable entrepreneurial ecosystem, fulfilling a virtuous startup-to-exit life cycle that will be key to growing our economy in the decades ahead amidst a backdrop of unprecedented technological disruption and innovation.

Thanks to the consistent efforts of many business and community leaders here over the last several years, that ecosystem is steadily gaining momentum. UCAN is working here in Greenville and with communities across the state to help create more infrastructure for angel investors to deploy their capital in search of exits that will generate even more gravitational pull to attract entrepreneurs to South Carolina.

We’re looking for investors and partners to join us in the cause, so if you’d like to learn more about swimming with sharks and enjoying early exits, please get in touch. We promise not to bite!