Early Exits: Exit Strategies for Entrepreneurs and Angel Investors

by Basil Peters

Exits are the least understood part of investing and entrepreneurship. Very little has been written about exits - the emphasis is usually on starting, financing and growing technology companies. Most of the earlier books on exit strategies were written for business owners who wanted to retire. More recently, there have been a number of books written about exit transactions for venture capitalists. This is not surprising considering that most venture capital (VC) agreements give the VCs all of the control in deciding when and how all shareholders benefit from an exit transaction. This book is about the large number of other exits - the ones that are not driven by the VCs. Exit opportunities have changed dramatically in the past few years. Today, it's more likely that a company will be sold without ever having an investment from a venture capitalist. Exits are also happening much earlier than before. The largest number of exit transactions today are in the under $30-million valuation range. These exits are often completed when companies are only two or three years from startup. The goal of this book is to help entrepreneurs and angel investors have more successful, more frequent and more profitable exits.

Genres: Business, Entrepreneurship, Nonfiction, Startup, Finance

195 pages, Hardcover

First published January 1, 2009

About the author

Basil Peters is an angel investor with a passion for exit transactions. After being an investor for a couple of decades he finally realized that successful investing requires two things: making the right investment decisions and getting your money back. The most fun Basil's had as an entrepreneur, and an investor, are when companies are successfully sold.

Dr. Peters is the principal of Strategic Exits Corp and fund manager for Fundamental Technologies II - an angel fund (seed stage venture fund). He also founded a venture capital firm and a hedge fund, and has been a CEO in Vancouver and Silicon Valley.

Basil writes a blog on best practices for entrepreneurs and angel investors at http://www.AngelBlog.net

He just published his first book: Early Exits - Exit Strategies for Entrepreneurs and Angel Investors (But Maybe Not Venture Capitalists).

Basil is an Entrepreneur in Residence at Simon Fraser University where he helps students and faculty spin-off research into promising technology companies.

He has a Ph.D. from the University of British Columbia in Electrical and Computer Engineering and has received the Entrepreneur of the Year Award, Canada Awards Silver Medal in Entrepreneurship, BC Science and Engineering Gold Medal and Business Leader of the Year Award.

For more: http://www.basilpeters.com/

Reviews

[Christian LeFer · Rating 5 out of 5]

Boy, this guy does NOT like Venture Capitalists! But, VC is changing, and if I could ask Peters, he'd probably say for the better. As capital markets converge, VC is becoming more responsive and transparent thanks to people like Brad Feld and others.

I'll admit, until I read Early Exits, I had not looked quite as strategically at positioning to maximize the perceived (and real) value of my business for the purpose of exiting as I do now.

This book is a MUST READ for entrepreneurs - it has huge value for passion-driven people who are more into business for the sake of doing something cool and meaningful, while opportunists who want to make a bunch of cash and get out (also an honorable reason to be in business!) will also benefit immensely.

Thanks to Paul Dickman for recommending it.

[Brian Morin · Rating 5 out of 5]

Terrific view of how to exit a high tech company early, make a reasonable nest egg, and prepare to do it again.

[Scott Lingran · Rating 4 out of 5]

An under-rated topic for most founders. Good thesis, but not sure on the tactical suggestions.

[Tej Dhawan · Rating 4 out of 5]

This is a POV developed in 2008 about an industry that has changed much even though its underlying emotion remains the same - create economic or societal value through commercializing an idea by a group of passionate entrepreneurs. The author's viewpoint (some might call it bias) is that economic value can be achieved sufficiently in the early years of a company, funded by the entrepreneurial team's passion and angel capital.

The above will be controversial for many founders and VCs. However, the book's real value comes in the latter half where a series of chapters (essays, really) give concrete advice about how to do the many MANY things necessary to facilitate the sale/exit. The who, what, why, and when are important considerations and the book lays them out quite nicely.

[A · Rating 4 out of 5]

A little simplistic and obvious.

[Leigh Morris · Rating 4 out of 5]

Presents the case for entrepreneurs avoiding VC funding, building quick and selling early.

[Mathher Abbassi · Rating 4 out of 5]

This book explains how and when to sell a company as an entrepreneur. I will be rereading it frequently to grasp the many advice and financial benefits.

[Kevin · Rating 5 out of 5]

Fascinating Insights

The author does a terrific job describing the value of early exits to investment returns and improving the odds of a successful liquidity event.

His insight that you should secure alignment from the very beginning on your exit strategy among the founders and early investors is invaluable. As he points out, most boards and management teams miss the opportunity to secure their maximum valuation because they are too focused on their day to day efforts, do not think to sell until business growth falters and do not appreciate how long the sale process can take.

Most startling was his description of the inherent conflicts of interest between VC investors vs entrepreneurs and angel investors. It is perfectly obvious once he explains the underlying business models but it was a new distinction for me.

The research done on the outcomes of companies that take VC funds is also interesting. For example, VC investments increase the likelihood of firm failure as the VC investment model requires them to block profitable early sales in order to compel a try for the much less likely 30x multiples. They also bring a likely delay of 10 years or more to the exit.

The book is well organized and written by a subject matter expert whose industry presentations posted to YouTube are well worth your time. I highly recommend this book for any founders or angel investors looking to improve the odds of a successful exit for their effort and risk.

[Manuel · Rating 4 out of 5]

Este libro propone ideas interesantes sobre el modo de operar y la dinamica financiera de los fondos de Venture Capital y como provocan en las satrtups una mortandad mas alta y un retorno mas remoto para los fundadores y los inversionistas angeles, al buscar los "homeruns".

Habla de una nueva epoca para inversiones en tecnologia donde gracias a las reducidas inversiones para arrancar la empresa y haciendo uso inteligente de los recursos ("Bootstrapping"), es posible tener salidas o "exists" a las inversiones mas modestas en valor abosluto, pero mucho mas rentables para los fundadores y primeros inversionistas.

Tiene lecciones interesantes y propone modelos de negocio e inversion diferentes que son validos en el contexto actual. Sin embargo el modelo ha sido un poco dejado atras por el desarrollo de "super angels" e incubadoras/aceleradoras que no responden al modelo de hace unos 5-10 años que es el que critica Peters.

[Robert · Rating 3 out of 5]

This was a quick read despite ample filler text that conspired to make an already short book appear longer than a series of essays. The author does a great job of providing some valuable insights into startup exits. The only problem is that the author's aim appears to be to offer one size fits all for different industries and companies without spending enough time researching industries and companies that he isn't familiar with. In this regard, the book is a lot like Good to Great. A lot of interesting perspective, much of which should be taken as such. Despite this, I would highly recommend that startup founders read this book.

[Max · Rating 3 out of 5]

Overall I understand the point made by Mr. Peters but I do not agree. He however does have more than two decades worth of experience on me so it is something that should be mulled over.

One thing that profoundly bothers me is that the Executive Director (Wade Brooks) of one cited sources (Willamette Angel Fund) does not agree with the interpretation of the data provided by Mr. Peters. If the information held true time and time again then would not Wade Brooks and Robert Wiltbank be great fans of Mr. Peters?

[Jose · Rating 3 out of 5]

Summary of book: don't raise vc funding, exit sooner, so you get money sooner, and therefore, do more startups more often, because building billion dollar companies is improbable, so don't even try.

The premise makes sense (not everyone should raise vc funding), I often don't l agree with the arguments used to justify the premise, though (often opinion rather than data-focused arguments).

Worth reading for a new perspective.

[Jose Papo · Rating 4 out of 5]

A very insightful book. The book gives many examples on why Early exits can be sometimes better for the entrepreneurs and to the angel investors than having many rounds of VC Funding and the dilution that happens. Considering also the new reality( where you don't need lots of money to start your growth trajectory, IPOs are becoming rare, companies are staying private longer and acquisitions are growing as an exit strategy) this book is a very good read.

[Ross Knap · Rating 5 out of 5]

Good lecture for business angels, entrepreneurs and for allmost all VC in my country (Poland) about early exits for their companies.

The book is pretty old but 90% of all information is actual today. Book contains a lot of data, real examples,costs, algorithms and advises about exits.

Easy and fast to read story (2 hours) will very good investment for people who are dealing with startup.

[William · Rating 5 out of 5]

Excellent overview of early stage investing and the risk associated with VC involvement. A good case for early exits is presented.