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The Economics of Creative Destruction
or Making money from growing things• Angel Investment Outcomes
• Key Strategic Choices• The Catalyst
Robert E Wiltbank, Ph.D.Associate Professor of Strategy &
EntrepreneurshipWillamette UniversityPartner, Buerk Dale Victor LLC503 715 [email protected]
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10
20
30
40
50
60
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Exit Multiple
Per
cent
of E
xits
Distribution of Returns by Venture Investment
Red Bars: U.K. % of exits in that CategoryBlue bars: U.S. % of exits in that Category
UK: Overall Multiple: 2.2XHolding Period: 3.6 years
US: Overall Multiple: 2.6XHolding Period:
3.5 years
Approx 22% IRR
Approx 27% IRR
Hold: 3.0 yrs.
Hold: 3.3 yrs.
Hold: 4.6 yrs.Hold: 4.9 yrs. Hold: 6.0+ yrs.
• Entrepreneurial expertise is significantly related to better outcomes.
• Particularly true in earlier stage investments.– Angels with entrepreneurial experience do significantly
better in early stage deals than investors with less experience. (0/1/2 ventures, vs. 3 or more)
• Expertise in the industry of the venture also valuable.– Significantly related to a reduction in investment failure
Investor Expertise
Outcomes Split by Industry Expertise
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10.0
20.0
30.0
40.0
50.0
60.0
70.0
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Multiple Category
Per
cent
of E
xits
No Industry Expertise Some Industry Expertise
60% better multiple for deals related to industry expertise
• Interaction: hi interaction had significantly less failure – Low interaction failed 61% of the time– Hi interaction failed 44% of the time
• Board Role: related to better returns– The largest effect size in regressions
• Passive vs. Active – Passive was significantly related to smaller investments and
worse returns
• Managerial Role: more participation isn’t always better– While only about 15% of exits, where an angel was involved in a
managerial role, returns were significantly less attractive.
Participation post investment
Outcomes Split by Board Involvement
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10.0
20.0
30.0
40.0
50.0
60.0
70.0
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Multiple Category
Per
cent
of E
xits
Not on Board On Board
4X better multiple to Board
Involvement
Outcomes Split by Due Diligence
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10.0
20.0
30.0
40.0
50.0
60.0
70.0
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Multiple Category
Per
cent
of E
xits
Less Than 20 Hours 20+ Hours
2X better multiple for 20+
due diligence
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10.0
20.0
30.0
40.0
50.0
60.0
70.0
<1X 1X to 5X 5X to 10X 10X to 30X >30X
Multiple Category
Per
cent
of E
xits
Yes Follow-On No Follow-On
Follow-On Investment from Same Angel Investor
3X better multiple in dealswhere the investor did not make
a follow-on investment.
30% of deals had follow on investments.
• Not Rocket Science: Just good business.
– Staying connected to your expertise is a good idea.
– Even a relatively small amount of due diligence helps avoid failure.
– Interaction post-investment is valuable to a point.
– Follow-on investments are significantly related to lower returns.
Better angel investing
Based on an in Depth Study of 50 Corporate Leaders that led incredible revenue growth projects.
– NOT a book about organizing, conceptualizing, or considering growth
– A book that gets into the specifics of leading growth when you are on the hook
– Lesson 1: Don’t look up look in
– Lesson 2: The monkey isn’t on your back, it’s in your head
– Lesson 3: It’s already there: reframe to find it
– Lesson 4: Small is beautiful
– Lesson 5: Lead with pragmatic idealism
– Lesson 6: Speed Thrills
Crown Publishing: NY, NY
A Passion for Two Worlds
Irony
Entrepreneurs wish they were the incumbent.
Incumbents wish they were more entrepreneurial.
Growth Leaders live at the intersection of these two worlds
….and love it.
12
mix the best of both worlds
Co-Create with Early Yes’s Leverage Your
Organization
Small Bets … Fast
Pragmatic Leadership
Design for Scale
Enter with Competitive Intent
Entrepreneurial World
Corporate World
The Catalysts
