Tag: The 7 Fundamentals of Early-Stage Investing

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Harvesting (7th Fundamental of Early-Stage Investing)

The last step of any investment deal is a successful exit – Harvesting. Notice that this statement says nothing about profitability, but rather the ability to walk away from a given deal. In the aviation industry, specifically pilot training, there is a proverb that says “any landing you walk away from, is a good landing.” Most landings are smooth and uneventful, but this statement technically includes crash landing an airplane and surviving the crash. In this regard, harvesting is the same way, ideally, one would like a nice, uneventful, and profitable exit, but should not discard the real possibility of a negative exit. David Amis and Howard Stevenson describe harvesting as, “the endgame of early-stage investments, the financial score by which you will measure your success” (p. 287, 2001). With this thinking in mind, below are some brief descriptions and highlights regarding positive and negative harvesting scenarios. Continue reading “Harvesting (7th Fundamental of Early-Stage Investing)”

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Supporting (6th Fundamental of Early-Stage Investing)

It takes more than money for an investment to flourish. This is especially true for startups and early-stage investment opportunities. Angel investors typically possess an additional number of skills and resources that increase the likelihood of success for a business. Startups will need these skills and resources to achieve early-stage milestones called Value Events. The level of support offered to a startup will largely depend on three critical factors: the investor(s) participation role, value events, and the type of startup. The crossroads of these three factors are further explored below in an attempt to better understand Supporting as a key fundamental of early-stage investing. Continue reading “Supporting (6th Fundamental of Early-Stage Investing)”

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Negotiating (5th Fundamental of Early-Stage Investing)

Negotiating is perhaps the most romanticized aspect of partaking in an investment opportunity. The idea of meeting room negotiations is widely portrayed as the climax of movies, in TV advertisements, and other media outputs. However, David Amis and Howard Stevenson suggest that it is often the shortest stage because many winning investors simply do not negotiate (p. 225, 2001). On the other hand, they also acknowledge that “Negotiation will almost certainly bring improved terms” (p. 228, 2001). Unlike other fundamentals of early-stage investing, negotiating is not a spectrum of choices. Negotiating starts with a choice between actually negotiating and not negotiating at all. Both are valid options and deserve further analysis to better understand the intricacies of negotiating early-stage investment deals. Continue reading “Negotiating (5th Fundamental of Early-Stage Investing)”