Terry Corbell, The Biz Coach
By Terry Corbell
Business Consultant

Trends in Attracting Start up Tech Capital, Exit Strategies



Good news if you’re concerned about obtaining capital for your startup, as long as you’re in mobile or other technology. Money is available.

That’s one of the conclusions according to the chair of two venture-capital panels at Digital Hollywood, the entertainment and technology conference in May 2013.

“There is plenty of capital available now for starting and growing a new business, particularly in technology and mobile,” says Joey Tamer, the chair of the two VC panels.

“The rash of IPOs last year (2012) seems not to have encouraged a strong IPO market, as the hype did not match the results, in many instances,” she adds.

The IPO trend impacts the type of exit strategies a company can implement.

“There are always many more exits by merger or acquisition than by IPO,” says Ms. Tamer.

“And this year (2013), with the IPO market limited, we are seeing a flood of companies ready to be sold, because all the companies that were ready at the end of 2007 (and onward for several years) and which have survived, are on the market now.

Joey Tamer

       Joey Tamer

With this development, she says “there are too many companies ready for exit for the demand of the buyers.”

More trends

In addition to the increase in available capital, she explained the trend since the Great recession:

  • Some of this capital is available because other vehicles for investing capital are still limited (or perceived as too risky).
  • This available capital is made more accessible in light of the reduced risks associated with start up tech companies, because there are so many more sources of capital:  incubators, accelerators, angels, super angels, angel groups, boutique venture funds, and large, established venture funds, and well as private equity capital.
  • Yes, there seems to be the “Series A crunch” which makes attracting professional capital difficult once your product is in the market but before it has significant market traction or share.  But that crunch has always been there. Years ago I called it the Series B Gap.

(For more of her insights on the so-called Series A funding crunch and what she terms the Series B Gap, see this article: Are Startups Facing a Series A Funding Crunch?) 

Exit strategy advice

Ms. Tamer says exits tend occur between six to eight years following launch.

“Venture capitalists need to create an ROI on each of their funds in a similar time frame,” she asserts. “Companies need time to launch, scale and fully realize their potential to scale, to drive up their valuation at exit. Predicting the conditions of the exit market that far into the future is difficult.”

She’s a strong advocate for developing an exit strategy, and “track that strategy just as they track their other business planning issues, adapting to market shifts as necessary.”

She differs with the opinions of VCs who advise entrepreneurs to “build your company for value and don’t worry about when and how to exit…But I urge my clients to watch for their exits, and plan their growth strategies with a clear eye on the end game.”

That’s great advice. You should always have an exit strategy in place – no matter what. (See: When Should You Develop an Exit Strategy? Now…Here’s How.)

Ms. Tamer, www.joeytamer.com, is a strategic consultant to entrepreneurs in technology and digital media, and to experienced consultants in all fields to maximize their practices.

From the Coach’s Corner, editor’s picks for related information:

6 Patent Tips to Protect Your Inventions, Intellectual Property — Whether you’re a new or existing business, take precautions to protect your inventions. Entrepreneurs are well-advised to consider ways to avoid legal entanglements over their inventions and intellectual property. If you don’t take steps to protect a valuable invention, you risk two possible consequences. But you can do something about it.

8 Strategies to Consider Before Starting A Tech Business — Before you launch a tech business, here are eight salient strategies to remember.

How to Attract an Angel Investor — Not only will you get the funds you seek with an angel investor, you’ll get added value in expertise. An angel investor offers seven tips.

Angel Investor: Tips for Increasing Cash Flow, Profits — A successful angel investor shares his tips for good cash flow and other profit issues.

“Capital isn’t scarce; vision is.”

-Sam Walton

 


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.






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Seattle business consultant Terry Corbell provides high-performance management services and strategies.