Our definition of EXIT = full or partial transfer of ownership for (the highest possible) value.
One of Kalon’s key criteria for investment in an underlying company is identifying a clear exit strategy.
We look at the ‘partner ecosystem’ including; competitors, customers, suppliers, distributors, corporate venturing partners, other investors/other sources of funding, etc. and compile a list of these potential strategic buyers.
Even though the exit comes last, the exit strategy is built into the structure of the company from when we make the initial investment. We ensure that the company founders and board are aligned on the exit strategy.
We have found during the past several years, in this increasingly digital and connected world, large enterprises and small enterprises alike are exploring the value that can be created by closer and deeper collaboration with each other. This collaboration has resulted in a dramatic shift toward earlier exits where large enterprises gain new skills, ideas, talent and markets, while entrepreneurs tap into large company’s distribution channels and customer’s bases.
Experience shows that it is the optimum time to exit an investment because large South African companies (trade exits) are accumulating cash on their balance sheets. The good news is that these exits can often be completed in just a few years from startup.
In today’s digital world, companies are being acquired only two or three years after startup. Several factors are driving this change:
- Web 2.0. Google transforming advertising of large corporations.
- Growth in private equity and buyout funds.
- Large numbers of medium-sized companies and individuals buying companies.
- Preference of larger corporations to grow by acquisition rather than incurring internal research and development (R&D).
- Reduction of the costs and time required to build new companies via the Internet.
- The trend toward early exits is creating exciting and lucrative opportunities for entrepreneurs and angel investors.
