Of all parts of the investment process, the exit strategy is undeniably the favorite of angel investors and entrepreneurs. The exit strategy is when a venture capitalist or entrepreneur intends to cash in on an investment.
There are different forms of exit strategies that investors and entrepreneurs to plan out in order to get that return of investment.
1. Initial Public Offer
For startup businesses, an exit strategy could be the Initial Public Offer (IPO) wherein a part of the business is sold to the public in the form of shares. This way, entrepreneurs are reimbursing investors within their own startup. Aside from that, the business gets more access to liquidity for investors and more chances to acquire other companies.
2. Mergers and Acquisitions
Startups can do well with exercising the option to merge with another company if problems with cash flow or liquidity arise. With mergers and acquisitions, the new business stays afloat and provides security among investors.
3. Private Offerings
Another exit strategy is to conduct a private offering of the business’ shares to individuals or a select group of investors to raise funds, which is more cost effective because brokers are not required. This can be done with crowd funding websites and real estate. The private offering is not registered with Companies House, and are exempt from required reporting arrangements and allows for existing shareholders to be bought out in a new fundraiser round.
4. Cash Cow
Cash cows are firms that can command a high market share in an industry dominated by low growth. They are able to sustain enough capital to stay afloat and have increased profits over the years to pay dividends to investors and shareholders by cashing in on their products.
5. Regulation A+
Regulation A+ is similar to IPO. The business owner can put your startup company on an exchange after qualifying. The entrepreneur can benefit from raising money and conforming to particular stipulations laid down by the Companies House without having to publish accounts publicly or file other mandatory paper works that would be required of an IPO.
6. Venture Capital
A good way to secure investors is to keep the cash rolling into the startup. Often, a venture capitalist would invest large sums of money into businesses and startups that are deemed worthy of note. Although this takes time for the investment to mature, it is able to provide a steady source of cash to create more investments, expand development, and attract other wealthy investors who see the potential for high returns in the future. More real estate crowd funding companies are going into venture capital.
Hundreds of thousands of businesses are formed every year. Many of them are in significant need of capital, presenting opportunities for investors.
While startup investing is not for everyone, those with a high risk tolerance can find it a stimulating and potentially rewarding pastime. The possibility of getting in on the ground floor of the next Uber or Facebook, speculative as that might be, can be compelling.
Suppose you hear about an exciting new company looking for investors. You are aware that a majority of startups end up failing within the first few years, but you think this one could hit it big. What do you do?
1. Check out the Management
You ultimately are investing not just in a product or an idea, but in the people running the company. No matter how innovative or promising the business concept may seem, the enterprise is unlikely to succeed without capable management. You should assess not only the founders, but also those promoting the investment. An initial review often can be done online. In the case of those with professional licenses (such as brokers, accountants, and attorneys), you can check their license status and any disciplinary history. You want the people running or associated with the company to not only have clean backgrounds, but also a record of success in other ventures. Look for qualities such as experience, intelligence, creativity, integrity, discipline, and leadership ability.
2. Determine How the Business Will Make Money
Lots of companies are based on an intriguing concept. But the company must be able to translate that concept into a product or service that it can produce and sell at a profit and in sufficient quantities to generate reasonable cash flow. What is the startup’s monetization plan? What is the market demand? Who are the competitors? What is the marketing strategy? Is the business scalable, having the ability to grow rapidly without sacrificing quality or profitability? If the company is unable to provide good answers to these questions, its likelihood of success is dubious.
3. Rely on Advisors
If you are buying a used car, it is good practice to hire a mechanic to look the vehicle over to make sure you are not getting a lemon. The same principle applies in evaluating a startup. It is crucial to use qualified professionals, such as an attorney and accountant. Make sure your advisors are familiar with startups-an attorney specializing in personal injury cases probably will not be a good fit. You may also want to consult with experts in the business sector in which the startup operates. Your advisors will provide various insights you would not have on your own. They also will help you command respect from the company.
4. Thoroughly Research the Startup
Ask lots of questions and request lots of documents. If the business is concerned about revealing confidential information, it can have you sign a nondisclosure agreement. You and your advisors will want to examine the startup’s business plan, offering memorandum, financial statements, budgets, capitalization table, and corporate documents (articles, bylaws, prior investor agreements, etc.) If the documents are shoddy or incomplete, that is a bad sign. Be wary of internal financial statements; statements prepared by an outside CPA have more credibility. Audited financial statements are best, but are less common because of their expense. If your investigation raises red flags, insist on complete explanations.
5. Review the Investment Documents
Your advisors can be of great help here. At the very least, you want to be fully informed as to how the deal is being structured and what rights and obligations you and the company will have. Your attorney can advise you as to what document changes might be in your best interests and help you negotiate with the company. Your accountant can let you know whether the valuation seems reasonable. Do not proceed unless everything is fully documented. You should not invest based on a handshake or mere verbal assurances.
Startup investing requires patience and hard work. Although there are no guarantees, you can reduce the risks and boost the chances of success by following the principles discussed above.
Alternative Investment implies investing in assets other than the traditional methods such as stocks, bonds, cash, etc. These could be private equity, hedge funds, real estate, commodities, precious metals, wine, art, etc. These type of investments are held by high net worth individuals, or institutional investors. The addition of this type of investment to the portfolio allows diversification, reduces risks and enhances returns.
The performance of assets used in alternative investments is relatively lower when compared to those in the traditional methods. They are relatively more difficult to value. They are also less liquid when compared to traditional methods.
Some popular types of alternative investments being widely used are:
This can be defined as investing in private companies such as start-ups, venture capital, and financing throughout phases of the company’s growth. This investment is done in companies that do not issue public stocks. These firms raise funds through capital invested by institutional and non-institutional investors.
Direct Investment in Private Companies:
This implies investing in a start-up or a private company directly instead of the equity. This is a high risk and high return proposition.
This implies investing in physical assets which are of high value. Examples of such assets are precious metals, real estate, oil, wine, art, jewelry, etc.
In this case, funds are collected from a number of investors to form a common pool of funds. These funds are invested using different types of strategies to earn the return on investments. They have the advantage that they need less SEC regulations than other funds.
This is similar to Hedge funds where a common pool of investor’s funds is created. These funds are invested in various financial instruments such as commodities, currency and interest rate markets.
A financial derivative is an arrangement where the investor is promised a payment when a certain asset reaches a certain level. These securities include futures, options, forwards and swaps.
Fund of Funds:
This is a means of diversifying investments. It is achieved by investing in multiple managers, asset classes or strategies.
Private Placement Debt:
Investors can receive a steady cash flow by investing in a private company through promissory notes.
As the stock market becomes volatile and unpredictable, people are seeking safe investment methods. At such a time alternative investment schemes have come to a safe secure option to private investors. Therefore, they are becoming highly popular. However, they cannot replace traditional methods completely. They should be used to complement them. This will help to increase and diversify the investment portfolio and minimize the risks of investment.
Are you willing to invest in a more long-term and reliable organic traffic source for your website? Then let’s look at a search engine that can assist you in increasing your traffic.
Interview an Influencer or Get Interviewed by a High-traffic Website
Have you heard of Tim Ferriss, the author of the Four-Hour Work Week?
His podcast is nowadays a staple content type that he provides to his viewers. Tim’s show has world-class performers who share their insights on a variety of topics, and he is well-liked on social media. Do Tim’s fans enjoy the show? So far, the show has received over 50 million downloads. On most days, it’s the most popular business podcast on iTunes.
Interviews, whether on video or audio, are inherently conversational, lively, and engaging. The great aspect is that it’s a win-win situation for both sides. The interviewer is exposed to a new audience, while the interviewee is able to provide his website visitors with new fascinating and authoritative information. You can ask an industry influencer to share your interview with their followers on social media if you interview them. Consider the organic traffic you’ll get from their social media followers, which number in the hundreds of thousands. Consider the level of interest generated by a prior Derek Sivers interview on the Tim Ferriss Show. Derek shared the show’s URL with his 283K followers on Twitter. It won’t hurt if you establish a relationship with the influencer as a result of the interview.
Similarly, being interviewed by a high-ranking website can result in a significant increase in search engine traffic. Harsh Agrawal’s blog, Shoutmeloud, received 35,000+ views in a single day after he was profiled by YourStory. That was the blog’s most popular search engine traffic source (with 600,000+ monthly visitors). Because interviews provide consolidated value, they can be used as a long-term lead generating source for your company. Consider how many bloggers you’ve learned about through interviews on YouTube and other high-authority websites.
You may also conduct a Reddit AMA if you have a very compelling storey to tell. Mateen’s AMA got about generating $85,000 in profit by selling TeeSpring shirts/hoodies received 2000 page views. He also boosted the number of visitors to his website on a daily basis.
By registering as a source with HARO, you can also answer queries from journalists. On HARO, Christopher from Snappa came across this question from Inc Magazine about the future of content marketing. He swiftly responded with a thorough response. He was mentioned in Inc a few weeks later as a result of this. HARO is an excellent strategy to have your brand mentioned on authoritative news sites such as Entrepreneur and Inc. Those backlinks will enhance your search engine traffic and increase your marketing strategy by improving your reputation in Google’s eyes. Contact an SEO agency to find out how you can do this and how they can manage it for you while you work on the bottom line of your business.