27 Pages Posted: 1 Apr 2014
Date Written: November 30, 2013
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.
Keywords: business angel, exit, entrepreneurial venture, securities regulation
JEL Classification: L26, M13, D81, G24
Suggested Citation: Suggested Citation
Carpentier, Cécile and Suret, Jean-Marc, Business Angels’ Perspectives on Exit by IPO (November 30, 2013). Available at SSRN: https://ssrn.com/abstract=2418200 or http://dx.doi.org/10.2139/ssrn.2418200