Jeff models four major steps that Angel Investors follow:
- Finding the deal
- Vetting the deal
- Closing the deal, and
- Exiting the deal
Successful exits usually take years, so setting expectations of a very long time horizon needs to be a mindset of anyone investing in startups.
But in the meantime you don’t just have to wait around; you can track everything the company is up to, measure it according to plan and ensure that your money is being spent appropriately. It’s better to be proactive during this time, functioning as an advisor, board member, or mentor to the founders so that you can be active in the outcome.
In order for a startup to reach the exit phase, three things need to happen.
Learning the process of seeing where the exits are going to come and what they look like, these three things have to happen.
The Major Revenue Stream
The startup establishes a major revenue stream that makes it attractive to others. When you’re looking at reports of expanding distribution channels, sales volume, and profit margins, the company is achieving specific benchmarks investors like to see.
The Startup is Acquired
Quite often, an established company will acquire a successful startup, pulling the startup into publicly-traded status instantly. Microsoft, Google, Kraft, Johnson & Johnson, and Pfizer are examples of companies in the acquisition business. Microsoft has been acquiring companies since 1987 [Source: Wikipedia], taking the Windows operating system company into the software market and beyond. Which products do you use now that were once part of an ambitious startup that are now under a bigger company umbrella?
The Startup Hosts Its Own IPO
This path to the exit is rarer but considered the optimal success story for an angel investor and the company.
Volcon – A Successful Exit
Volcon was one of those companies that Jeff broke. He discussed the early analysis of finding the deal, vetting the deal, and closing the deal. In October 2021, Jeff explained how the exit process unfolded; an exceptionally quick turnaround on a process that usually takes significantly longer.
Volcon stepped into the off-road vehicle space as the first all-electric outdoors-vehicle manufacturer, with the aim of becoming the Tesla of the ten billion dollar outdoor powersports industry. [Source: Wefunder]
Volcon founders include Andy Leisner, with lifelong powersports industry experience, serving as a board member of the Motorcycle Industry Council and former world championship motorcycle racing competitor; Adrian James, who was founder and CEO of Sprout Equity Ventures, and Christian Okonsky, who has been bringing leading-edge products to market for over 27 years, holding more than 2 dozen US and foreign patents, who also worked on engineering Dell’s first notebook computer.
Other top members of the Volcon team include Bruce Riggs, who came from Compal Electronics Smart Device Group and Quanta, with experience in domestic and international electronics manufacturing and operations. Riggs served as a past chairman of the IEEE 1625 Battery Standard. Hector Moya, the lead engineering product manager is an experienced developer of consumer products including 2 and 4 wheel electric vehicles.
Back in 2017, the UTV market was $7.7 billion and was projected to reach $14.1 billion by 2025 with a CAGR (compound annual growth rate) of 7.8%. [Source: WeFunder] However, with Covid and factory slowdowns and shutdowns due to the rapid spread of the disease, the growth rate flattened a bit. Still, demand is strong and the price of gas is encouraging buyers to look to an EV solution.
[Source: Allied Market Research]
While early days as an IPO are typically choppy for newbies, Volcon’s stock price now lands today (November 17, 2021) above $14/share, up from opening day at $8.11 on October 6th.
Boardroom invested $100,000 as the lead investor on WeFunder, along with approximately 1000 other investors. On October 6th, the company had targeted an opening of $5 per share, but the actual opening landed at $8.11 per share.
Due diligence is required at every step – finding the opportunity, vetting the opportunity, closing the deal, and exiting the deal. It’s easy to get caught at any stage of this process by emotions outweighing the numbers, not keeping up on what the companies are doing with the money you’ve invested, and a myriad of other distractions.