Introduction to Angel Investing

6 Get Your Investment Back

Introduction to Angel Investing 1 How to Start 2 Set Goals 3 Pick Good Companies 4 Make Good Deals 5 Grow Good Companies 6 Get Your Investment Back

Step 5: Get Your Investment Back As a direct investment in a private company, Angels cannot simply sell their shares whenever they want, like they can in public companies. Eventually, Angels will need to get their cash back out of the company in what is called an “exit” or “liquidity event”. There are 4 major types:

1) Take the Company Public While initial public offerings (IPOs) were an important exit mechanism prior to 2000, they now account for less than 10% of large, publically reported startup exit events.

2) Sell the Company to a Bigger Company The vast majority of successful exits occur through the investee company being acquired by another.

3) The Company Buys Back the Shares/Loans Sometimes the founding team may have the right to buy the investors out of their shares. Or due to a preferred shares agreement, the investor can force the repurchase of their shares.

4) Zombies, the Walking Dead and the Dead If a company continues without you and never pay back their investment, they become zombies.

| Introduction to Angel Investing: How to Start