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Comment by YesBox | Hacker News Reader

>Angel investors also face the longest time horizon for liquidity of any investor. Private equity aims for 3-5 year returns, and VCs typically run 7-10 year fund cycles, but angels usually wait 10+ years for exits. This means angels aren’t just taking company-specific risk, but also the risk of facing more macroeconomic cycles.

>Think about all that's happened since 2009 when I started: multiple presidential administrations, a global pandemic, zero interest rates, and now high inflation and higher interest rates. My investments have had to withstand all of these shifts, and many didn't make it through.

Really interesting stuff (for me, as an outsider).

Can anyone comment if VCs are looking for shorter fund cycles or are the macro economic shifts what's capping it at 10 years?

I once read one reason why startups take so long to IPO is so private investments can benefit longer from the growth

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My LPs want liquidity now, always. 2021 was hot and it’s been relatively quiet since. Mega funds are keeping companies private longer. Capital is tied up which hurts emerging managers trying to raise. My LPs want returns in 6 years which only works if everything goes perfectly which almost never happens; that’s how long $100M+ rev takes if you triple yearly. IPO requires more rev than before, everything’s larger.

Would smaller ventures not be an option? Say investing 500k$ and selling for 10M roughly 5 or 6 years later?

I would imagine that building these smaller companies looking for smaller exists would be easier and more predictable.

That’s not necessarily venture returns so LPs might not be interested. Selling secondaries is also a pain as you generally have to pay fees and sell at a discount.

It would be helpful to run out the math on the $500K investment: what's the post-money on that investment when it was made? How much capital did this mythical sold-for-$10M in 5-or-6 years company raise? (Or did it survive for a half decade on a total investment of $500K?) What was the headcount and the revenue and the burn? (And to whom does it sell for $10M?) Assuming that it wasn't a wipeout, you'll quickly find that the math doesn't... math: if you have somehow conjured a successful outcome in your mind, what you likely have is not a venture-scale business.

6 years?

As an LP, I would be excited for liquidity in 10 years at this point.

It seems like even for successful companies, there isn't a clear path to an exit for many of them. Add to that the increase in late-stage investors, and there isn't much of an incentive to exit.

A bit hyperbolic but yeah. It also depends on the industry / stage. I’m always looking for creative ways to get liquidity out given the exit issues you mention.

I wasn't trying to be hyperbolic actually. I really would be happy if an exit would happen in 10 years.

Thankfully, I can be patient, but I wonder sometimes if some of these companies will ever exit.

Sorry, I meant my statement was a bit hyperbolic at 6 years.

Waiting for a few as well, good luck!

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