But, actually, IPOs are one of the less common ways you’re likely to make a return as an angel investor.
Very few companies – even large ones – end up going the IPO route. And the number of companies opting to go public is steadily shrinking.
But that’s okay, because the most common type of exit is actually my favorite. I’m talking about acquisitions.
When a startup’s main product or service starts getting a lot of customer traction, you’d better believe that the world’s biggest brands take notice.
After all, why would the Googles, Facebooks, and Amazons of the world sit around and watch an up-and-coming business eat into their potential profits? It’s much easier for those enterprises to purchase a winning startup than it is to try to compete or copy it.
The best part? Acquisitions tend to happen much earlier in the startup timeline, so angels get their payouts sooner.
That means, instead of waiting up to a decade for a small startup to make it to the public markets, you could be cashing out in just a year or two.
Although acquisitions typically yield lower returns than the multiples you’ll get from an IPO, their quick turnaround means that you have the ability to flip that capital into more and more angel investments, rapid-fire. It’s almost like making compounding returns.
I like acquisitions so much that I often specifically seek out startups that I believe are on track to get gobbled up by the world’s largest companies. Curious what that entails? Here’s a perfect example.
I recently sat down with the founder of a startup that uses artificial intelligence to allow consumers to order products via their smart home speakers (think Amazon Alexa or Google Home).
This early-stage company has proprietary software that’s making waves in the ecommerce industry – and retailers are flooding in to create their own “voice-first marketplaces.” It’s a whole new way to sell things, leveraging tech that many people already have in their homes.
Now, do you really think Amazon, the ecommerce supergiant, is likely to sit by and watch this tiny startup harness the power of this new sales strategy?
I don’t. In fact, when and if this business starts to grow, I think it’ll raise eyebrows in more than one corporate office. I wouldn’t be surprised if it got snatched up for tens of millions of dollars in just a few years.
The best part about this particular company is that it’s gaining traction while still in its earliest stages. In fact, the opportunity lock in a ground floor opportunity with this startup is still open to anyone who knows where to find it.
That’s exactly why I created the Angels & Entrepreneurs Network – to connect like-minded angel investors with deals that could reward them with huge returns. The startup I described here is one of our featured deal recommendations.
Want to get in on the action? Just click here to learn how.
Until next time,