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Investor Connect Podcast

Investor Connect is for investors interested in learning more about investing in startup and growth stage companies. Experienced investors share their experiences and advice with those who are considering an investment into startups and growth companies. It includes a podcast series of interviews with investors to inform others about the process of funding startups as well as a resource list and a discussion board.  

Topics include sourcing, analyzing, and researching companies. Other topics include valuations, terms Sheets, board of directors, board of advisors, due diligence, syndicates, venture capital, angels, angel networks, family offices, crowdfunding, exits, and more.

Investor Connect is a community program. We welcome your suggestions for speakers and topics which you can send to us through the Contact page. No registration is required to use the resources.  Discussion boards are available to post and answer questions about startups and growth company investing through which registration is required.

Investor Connect is a program under the Texas Open Angel Network which is a 501(c3) non-profit dedicated to the education around startup funding.

Disclaimer: Hall T. Martin is the Director of Investor Connect which is dedicated to the education of investors for early stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Dec 28, 2021

3X in 3 Terms

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

I analyzed the results of several angel networks and found that 65% of the investments after three years were still in business but were no longer on the venture track. 

In most cases, they were growing businesses but were not going to be bought out for a significant return to the investor as the market conditions had changed, competition had taken over, or the founder was no longer interested in keeping pace to achieve a venture exit.

The best-case scenario was the entrepreneur would sell the business for 2-3X after 10 years, in which case the investor would get a minimal return on investment.

In my investing experience, three years into the investment, it becomes clear if the company will continue on the venture path or not.  

I often saw the entrepreneur signal their departure from the venture path by taking above-market rate salaries. 

I called this taking the “payroll exit”, in which case they no longer needed an “equity exit”.  

This left the investor stranded on the equity plan with no way out.

I set up a deal structure that would allow the investor to go on the payroll exit in the event the startup chose that path.

In this structure, the investor receives 3 times their investment 3 years from the date of investment.  So $100K in, yields $300K out.

If the company continues on the equity exit, then the investor may choose to stay in the investment. 

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.

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