alt Hacker NewsIs it a thing for angels to exit in the early rounds?
Instead of being shoved down the cap table by a giant tranche of series A preferred stock, might it not be appropriate to give the angel a payday instead?
I guess some angels want to keep their fingers in the pie? And, more likely, it’s just not a reasonable expectation to see an exit like that way before anyone else does?
Replies
DrAwdeOccarim • yesterday at 6:15 PM
Yea, I’ve seen cashing out the principal+next investment and letting the rest ride.
chii • yesterday at 5:53 PM
early exits probably won't get the type of return that an angel investor would be interested in monetarily, since you need more than fu-money to motivate them.
It’s just the same thing as a take profit in the stock market. Intellectually it seems reasonable but because a lot of the bets go straight down (never raise another round for that take profit opportunity) you need a higher multiple of the ones that win.
You end up taking profit at a 1.1 return and in 10 years it ends up being uber.
Positive skew strategies (lose a little on a lot of bets and win big on a few) are impossible to use take profits on because you need those big winners.