This post concludes my series of blogs on my reading, Winning Angels: The Seven Fundamentals of Early-stage Investing by David Amis and Howard Stevenson. Which brings us to the last and final fundamental of early-stage investing, harvesting.
For angel investors, the harvest is essentially the exit.
When I sat down to write this blog, I was not really sure which way I wanted to take it. Per usual I really want you as the current or future entrepreneur to understand how to look at this fundamental in a way that benefits you.
In my external reading I found an article by Venture Giants (VG) that posed a great question. “What would be your answer if an Angel Investor asked you how he/she could exit from your business angel investment in the future?”
VG suggests that you should already know the answer to this question before you even throw your elevator pitch at a potential angel investor. I agree. How an angel investor is going to exit can affect the entire deal. Think about it, if this fundamental is part of the reading for angel investors, then it is understandable that they would want to know how it is all going to play out for them in the end…from the beginning. They will expect to see an exit strategy according to VG. You as an entrepreneur should also have a fine understanding of harvesting and the exit from where you stand and be sure that you and the angel investor are on the same page.
Angel investors will not only want to know the how of the exit, but also the when, the how long. You should also have a good idea of what your growth potential and plans are when you are calculating the “how long”.
There are several different exit opportunities that you can offer to your angel investor. Will you want to sell your company? Perhaps a partial sale. There is also the option of an initial public offering or IPO or stock where you would take your business public, to name just a few. There are also negative harvests and exits, such as a bankruptcy or what Amis and Stevenson refer to as, total annihilation. I think it is very important for entrepreneurs to understand the many different outcomes and possibilities before they even have an initial meeting with an angel investor. Knowledge and education is key and it is pertinent that you are realistic in what the future could be by doing all of your research, getting the numbers, and really having a road map of what your venture looks likes from every single angle.
I would recommend looking into Venture Giants article as there are some great links to other articles that will help you to craft an elevator pitch as well as provide info on looking at your growth strategy and expansion.
Amis, D., & Stevenson, H. (2001). Winning Angels: The Seven Fundamental of Early-stage Investing. Pearson Education Limited.
What is your proposed Exit Strategy for an Angel Investor? (n.d.). Retrieved from Venture Giants: https://www.venturegiants.com/news-channel-344-what-is-your-proposed-exit-strategy-for-an-angel-investor.aspx