Posted on Tuesday, September 13th, 2016
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Gil Penchina, “4x Entrepreneur, 100x Angel, 5x Unicorns,” shares unique insights on how savvy investors make money through exits at the H/F Liquidity Conference. Gil has invested in multiple billion-dollar companies like LinkedIn and PayPal, he and Jonathan had a long talk about how investors make money and ways investors can improve their financial outcomes.
Background: 80% of angel investors are local to investee.
Use Linkedin's Advanced Search function, using the expressions "Angel" as a Title and the Zipcode for the center of a 100mi radius search in the Within field.
Most angel investors use the term angel in their Title (Ie the top level description of their activities). So the output will be a starting point not just for individual investors, but by delving into theor profiles, often the names of Angel Investor Groups of which they are members.
When investors make a liquidation preference a condition for investing in a startup, they do it in order to claim their part of the profits first. But later-stage investors can demand liquidation preferences that ensure that they get paid before earlier investors, too. It’s kind of like a layer cake.
More references -
Brad Feld always has amazing explanations -
There are two components that make up what most people call the liquidation preference: the actual preference and participation...
-certain multiple of the original investment per share is returned to the investor before the common stock receives any consideration. For many years, a “1x” liquidation preference was the standard.
Preferred stock with a participating liquidation preference will get their liquidation preference first and then have the opportunity to participate pro rata with the common stock!
i.e. If VC invested $2M and is fully participating in company now valued at $5m (VC owns 40%, 2M/5M) which is sold at $10M, VC gets