So all the forces are pushing VC firms to do bigger deals, that consume more capital, that deliver the potential for ever-higher multiples. 10X may not be enough… maybe your target now needs to be 20X, or 30X. You’re swinging for the fences every time.
If you’re an angel investor, this may not be a good idea.
If you can put $2M into an angel investment over two rounds and sell your stake in Year 3 for $6M… that’s only a 3X multiple, but a a 54% rate of return! If you own a third of the company, that means an $18M acquisition… as mentioned above, that can be done as the divisional level at many, many large companies.
No substantial VC is going to be interested in a deal that sells for $18 million. “Doesn’t move their needle.” “Failure to launch.” If they have one of these in their portfolio, its counted as a failure.null
