Aligning funding needs to investment goals

Divestment and liquidity

Divestment decisions are more important than investment decisions – because at the end of the day one needs to book profits either to create liquidity for yourself or to make a new investment . In conventional instruments, these are quite straightforward and universal - in the stock market it is as simple as pressing on screen the sell button, for a real estate sale when you can instruct your agent to look for a buyer. In case of divestment or exit in a startup it is much more involved and need to be planned well in advance before investing. This is because the divestment or exit terms are not universal but are arrived at after negotiations between the entrepreneur and the investor before making the investment. These terms would be added in the shareholders’ agreement or any contract between the entrepreneur and the investor. Now that is one part – about the terms of exits. How does the investor get liquidity for his investment – a new investor coming in or a share buy-back if the company has enough liquidity itself. Normally a start up would raise a new round of capital at a higher valuation for growth but that does not necessarily create liquidity for an existing investor. Even here there may be a need for a negotiation among entrepreneurs and investors to create liquidity.

At AngelEx we believe that creating liquidity for investors is the key to maintain a vibrant start up ecosystem. Our business model helps create divestment opportunities for the investor while retaining valuations of your investments.