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Business Angels’ Perspectives on Exit by Ipo

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  • Cécile Carpentier

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  • Jean-Marc Suret

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    Abstract

    We analyze exit-related perceptions of the members of a large, well-structured Canadian angel group. Because they invest in high tech deals larger than CAN$1.2 million, together with venture capitalists and a matching fund, these angels should consider the initial public offering (IPO) as a possible exit mode. However, they show a strong preference for the trade sale. This preference is consistent with the economies of scope hypothesis: getting big fast has become more important because large firms can fully and rapidly exploit innovations, resulting in more small firm acquisitions. Securities regulation is also perceived as a major impediment to exiting onto the stock market. Both reasons explain why IPOs are not considered an exit mode. Reluctance to exit through an IPO increases with angels’ experience. Our observations have implications for entrepreneurs, business angels and policy makers Nous analysons les perspectives selon lesquelles des anges membres d’un groupe structurés d’anges canadiens envisagent la disposition de leurs placements. Ces anges investissent des montants de l’ordre de 1,2 millions de dollar dans des entreprises technologiques et l’émission initiale est, de ce fait, une option de sortie envisageable. Toutefois, les anges énoncent une préférence marquée pour la cession en bloc de leurs actions à des acquéreurs stratégiques. Cette préférence est cohérente avec l’hypothèse des économies d’échelles : pour les entreprises innovantes, il est essentiel d’acquérir rapidement une taille suffisante à l’exploitation rapide des innovations, et l’acquisition par un joueur important du domaine est un moyen plus efficace d’acquérir cette taille que l’émission initiale. Toutefois, la réglementation des valeurs mobilières est également perçue comme un obstacle majeur aux émissions initiales

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    Bibliographic Info

    Paper provided by CIRANO in its series CIRANO Working Papers with number 2014s-21.

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    Date of creation: 01 Feb 2014
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    Handle: RePEc:cir:cirwor:2014s-21

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    Keywords: business angel; exit; entrepreneurial venture; securities regulation;

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