Expected exit route
While most of the startups expect to provide an exit by going public someday, majority of your exit opportunities will realistically come in the form of acquisition of the startup by a bigger fish. We collated a set of 50 exits done by some notable Angel investors in the last decade to understand this better:
In 90% of the cases the startups were acquired and hence the investors could exit.
In only 8% cases the shares of Angels were purchased by institutional investors during a bigger round of funding like Series A/Series B.
Only in 2% cases the startup bought-back the Angel Investors' shares and
In another 2% cases the exit came at the time of IPO.
This breaks a common myth among first time Angel Investors that entry of institutional investors at a later stage automatically means exit of the earlier investors. That's because institutional investors would seldom like to hand out money to investors directly rather than infusing cash in the startup itself. And they would certainly not want the startup to use their money to buy-back the shares of earlier investors.
Time taken to exit
In our set of 50 exits by notable Angel investors, the average time taken to exit came to 4 years, the majority of which came through acquisitions or purchase by institutional investors.
Now, to understand how much time it takes to IPO, we took a sample set of 50 companies that have been funded by venture capital funds and got listed in the past 5 years. These companies took an average of 14 years to get listed from their founding year. Assuming that the Angel investors come in at the seed stage of 0-4 years, you can expect the IPO to happen at least after 10 years.
Joining the pieces together, we get a target timeframe of 4-10 years for your exit. This should be sufficient to tell you the level of patience it requires to invest in startups.
Find answers to other questions relating to Angel investing in India:
This article is a part of the Jun'24 edition of our Startup Newsletter. Here's the complete publication:
