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> I’m deep into my second pivot, and haven’t yet delivered an exit two years after that initial money. Haven't delivered an exit after two years?!? What's wro

> I’m deep into my second pivot, and haven’t yet delivered an exit two years after that initial money. Haven't delivered an exit after two years?!? What's wrong with you?!? Sarcasm aside, while taking money from friends and family may not always be desirable for a variety of good reasons, the problems that arise from it are usually the result of unrealistic expectations. Most companies never achieve an "exit", the average time to a liquidity event for companies that do is well more than a couple of years and most liquidity events don't produce Hamptons money for everyone involved. If you have raised capital from friends and family and are sweating bullets after two years because you haven't made yourself and your investors wealthy, the expectations you set for yourself and your investors were way, way off.

wdewind 13y ago
I don't think he means exit in the sense of IPO or sale to PE. I think he means exit for his initial f&f investors. It's not entirely unreasonable to expect a larger seed round or even a series A after 2 years.
- 7Figures2Commas 13y ago
  A professional investor (or group of investors) providing a seed or Series A after a couple of years is realistically going to have little interest in cashing out existing friends and family investors at a gain. At that stage, you're investing to grow a nascent business, not to buy the founder's mom and dad a deluxe new kitchen.
  - 001sky 13y ago
    Yes, this is right. An angel or early investor should not be <expecting> any capital return until a proper exit. Especially if that "return" is coming from incremental capital being raised by the startup. Later in the game, when the business is de-risked and there is more demand for the company than shares to be sold, things may be different. This is why you see late-stage mezzainine investments that might take out early investors before an IPO. That is merely because those guys are momentum players, and the original investors' work in taking the actual risk of the business has been already done.
  - wdewind 13y ago
    Really? Who is going to raise a down round for your seed/series A? And if you're raising an up round, why does it matter if the shares come from you or f&f? Honest questions.
- Domenic_S 13y ago
  I've always heard it as f,f&f -- friends, family, and fools. ;)
gohrt 13y ago
A company that is successful enough to still be a going concern 5-7 years later is generally in good enough shape to either pay off the original investment (not converting the "convertible loan"), or make interest payments, or raise new money to buy out the original investors[]. [] In a case like this, buying out the founder's mother is less of a red-flag than buying out the Angel investor.

wdewind 13y ago

I don't think he means exit in the sense of IPO or sale to PE. I think he means exit for his initial f&f investors. It's not entirely unreasonable to expect a larger seed round or even a series A after 2 years.

7Figures2Commas 13y ago
A professional investor (or group of investors) providing a seed or Series A after a couple of years is realistically going to have little interest in cashing out existing friends and family investors at a gain. At that stage, you're investing to grow a nascent business, not to buy the founder's mom and dad a deluxe new kitchen.
- 001sky 13y ago
  Yes, this is right. An angel or early investor should not be <expecting> any capital return until a proper exit. Especially if that "return" is coming from incremental capital being raised by the startup. Later in the game, when the business is de-risked and there is more demand for the company than shares to be sold, things may be different. This is why you see late-stage mezzainine investments that might take out early investors before an IPO. That is merely because those guys are momentum players, and the original investors' work in taking the actual risk of the business has been already done.
- wdewind 13y ago
  Really? Who is going to raise a down round for your seed/series A? And if you're raising an up round, why does it matter if the shares come from you or f&f? Honest questions.
Domenic_S 13y ago
I've always heard it as f,f&f -- friends, family, and fools. ;)

gohrt 13y ago

A company that is successful enough to still be a going concern 5-7 years later is generally in good enough shape to either pay off the original investment (not converting the "convertible loan"), or make interest payments, or raise new money to buy out the original investors[]. [] In a case like this, buying out the founder's mother is less of a red-flag than buying out the Angel investor.