Returns

By: Marianne Hudson, ACA Executive Director

Three ACA member organizations have really put on their hiking boots with excellent adventures and exits in late 2016.  On top of some really great investor returns, they also include a couple of important social returns that I really like.  Let me tell you about them:

By: Marianne Hudson, ACA Executive Director

Angel group valuations and deal sizes are on a huge growth trajectory according to the HALO Report through the third quarter of 2015.  The report, released today by the Angel Resource Institute at Willamette University, shows the median seed stage valuation at an all-time high of $4 million, a 33 percent increase over 2014.  Some of this is reflected in median round sizes, which more than doubled in one year - $350,000 in Q3 2014 to $725,000 in Q3 2015.

These increases are a really big deal for the angel group community, and I hope that these trends reverse themselves soon.  As ARI’s Vice Chairman of Research Rob Wiltbank said, “This report reinforces the trends that we have been reporting on for the past several quarters, particularly the rise in all round sizes and pre-money valuations. These trends have a significant impact on the way that angels and entrepreneurs plan for the future when raising capital.”

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.

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Tapping into America’s Biomedical Seed Fund by Ethel Rubin  on  February 12
The Seraf Method to Valuing Startups: Exit Practicalities by Ham and Christopher LM  on  January 16