Angel Funders Report 2021 - Flipbook - Page 44
GETTING TO THE EXIT
While angels invest in early-stage companies for many reasons, generating a
financial return via a successful exit is an essential part of the investment equation.
One of the key functions of the Angel Funders Report and the ACA Data Initiative
is to gather information on exits, with a goal of building data over time so that we
can provide meaningful, actionable insights on what drives successful exits.
Exit data from 2020 consistent with past
FIGURE 26. M&A Dominate Exits
years shows that about 2/3 of exits are
the result of an exit transaction, and 1/3
of businesses do not survive. Nearly
90% of the intentional transactions
are mergers and acquisitions (which
is consistent with exit trends over the
past 20 years) as shown in Figure 26.
Many entrepreneurs have IPO dreams,
but IPOs are a rare exit mechanism
for most startups, with less than 6% of
businesses achieving IPO status. These
trends are consistent over time and will likely continue given the preference for
large companies to acquire rather than innovate from within. However, ACA
analysts note growing use of Special Purpose Acquisition Companies (SPACs) and
increased focus on anti-trust regulations for larger companies as two factors that
may lead to more IPOs in the future. ACA will continue to monitor these trends
Companies with the most exits continue to be from the life sciences and
enterprise software/software-as-a-service sectors. Life science companies also
tend to produce the most IPOs, as shown in Figure 27.
The success of an exit is typically measured as a multiple of the dollars invested,
and in 2020, the average multiple was relatively high at 9.6X the invested capital.
This average was likely influenced by several large exits, so it’s important to look
at the range of exits in addition to the average. Merger and acquisition exits
42 | Angel Paydays: Getting to the Exit
ranged from 0 to 1,000X, as shown in Figure 28. We must remember that IPOs
serve different purposes for technology and life science companies. IPOs are an
“exit” for technology companies. For life science companies, mid-stage IPOs are
fundraising events and are part of a longer journey.
FIGURE 27. SaaS and Health Care Lead Exits; Life Sciences Lead IPOs
FIGURE 28. Exit Multiples for Ongoing Businesses
Type of Group
# of Exits
Angel Funders Report 2021 | 43