Exits

Don’t be surprised to see substantially more companies using Regulation A to sell securities through public solicitation of investors beginning June 19, when the SEC’s new “Regulation A+” rules take effect. Why? The new “Reg A+” provides a new option for “mini-IPOs,” allowing companies to raise up to $50 million from investors in unregistered public offerings. Angels benefit it two ways. This is another opportunity to invest or it can help their portfolio companies secure the funding needed to take them to the next level. 

By Bethann Kassman, CEO of Go Beyond Network, an ACA member angel group in Naples, Florida, which is part of an international angel organization Go Beyond Investing, which completed a study of the financial returns and experiences of its member angels in Europe and the United States.  To download the report, go to https://go-beyond.biz/ and click on “download report”.

Go Beyond Investing, the international business angel platform, recently launched The Go Beyond Investor Report: Introducing Angel Investing as an Asset Class for All Investors. The Report, based on six years of data, shows that taking a portfolio approach is critical but not sufficient for delivering success to angels and the entrepreneurs they back. In addition, there must be tools to educate investors both in a learning environment and “on the job”; ability to invest with small tickets; access to deals that have benchmarked valuations and terms; mechanisms to leverage the community intelligence and professional deal leadership certification and compensation.

By Bill Payne, Frontier Angel Funds

Three outcomes dominate exits of angel-funded companies:

  • Dead bugs – Startups that go out of business, returning less-than-invested capital to angels (usually zero).
  • Positive exits – Companies that liquidate with capital gains to investors, usually via a cash sale to a larger company.  While IPOs are possible, they are very rare for angel-funded companies.  The exits can range from simply return of capital to wildly exiting multiples.
  • The living dead – These companies continue indefinitely to operate with internally generated cash without pursuing an exit.  By intention or due to market forces, these entrepreneurs turn what at first appeared to be a high-growth opportunity into a lifestyle company, that is, a company that meets payroll for all employees but does not demonstrate sufficient upside potential to attract buyers.  Such companies are going sideways and, as such, offer no opportunities to angels to harvest their investment – not even to write off their investment.  There are also examples of entrepreneurs who “get comfortable” with the income provided by their startup companies and simply choose not to pursue an exit.

By: Marianne Hudson, ACA Executive Director

The SEC unanimously approved a new rule, dubbed “Reg A+,” on March 25th.  The rule allows companies to raise up to $50 million from the general public in unregistered public offerings, building on a part of the JOBS Act passed by Congress in 2012.  Issuers may begin using this rule in about 60 days.

Many ACA members have asked what Reg A+ means for angels and the early stage investing community, especially given some blogs and media stories with a wide variety of interpretations.  This post provides basics about the new rule, and ACA is following up with two activities:  a special breakfast briefing at the ACA Summit on the new rules, led by law firm Reed Smith and ACA’s policy advisory council of attorneys is preparing a deeper information piece for ACA members.

By: Jeff Solomon, CPA, CVA, Managing Partner, Katz Nannis + Solomon, PC

Early stage investors are often asked to sit on boards, and many sets of investment terms require that outside investors sit on the key board committees.  But what’s involved in being on an Audit Committee, and how do you do it right?  Let’s take a look at examples of an effective working relationship with the auditor and the types of questions you should be asking your auditors when you meet to add value to the governance process and to the company you represent:

As we say goodbye to 2014 and jump in to 2015, we would like to add our congratulations to all ACA members with recent growth, investments, and exit news!   Here are a few recent stories below:

Big Returns!

Welcome to Angel Insights, the new blog of the Angel Capital Association. We want to use this blog for more dialogue with our member investors, but also to engage with the startup funding and support community, policy makers, and others interested in active angel investment and the innovative startups angels support with money and expertise.

This week and over the coming months, Angel Insights will include postings from me as ACA's Executive Director, but also from ACA Chairman David Verrill and members of ACA's Board of Directors. We also plan to include some of the great blog posts from our members and partners.

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New Look, Continued Commitment by Emily Angold  on  September 21
Kevin Learned: Entrepreneur, Teacher, Angel by Emily Angold  on  September 04
Five Ways Angel Investing Gave Me Wings by Kelley Skoloda (Blue Tree Allied Angels)  on  August 31