When a positive investment decision reaches a company, the entrepreneur should realise that the company is growing towards success together with the investors, not for the investors.
Between three and seven years is the span usually determined for an investment, but occasionally the investment time approaches as much as 10 years. For the entire period of the investment the investor strives to boost the value of the target company and thus achieve an increase in his or her investment. Numerous different factors, however, influence the success of the target company during the investment period.
A successful exit process is started already in conjunction with making the investment decision. The company is exited in one of the following ways:
- Divestment The investor sells his or holding to the next investor, the new management (MBI) or a company (industrial exit).
- Repurchase: The entrepreneur, the company itself or the company’s management (MBO) buys back the business angel’s shareholding.
- Repayment of loan: When a capital loan is used, the company repays the debt with interest to the investor.
- Refinancing: The new investor purchases the shareholding of the original investor. The new owner can be, for example a venture capitalist or another angel, who has specialised in financing the company’s next development stage.
- Listing: The company is listed on a stock exchange – not very common.
In the event of an unsuccessful exit, the company is wound up or it applies for/an application is filed for bankruptcy proceedings.
The shareholder agreement usually specifies various conditions in respect of exiting: how and under what time scale exiting takes place and how to proceed if exiting does not go as planned.