The amazing Tom McKaskill has made his latest book, Invest to Exit – a pragmatic strategy for angel and venture capital investors, available free for download.

New Zealand startups have typically followed a high-growth strategy, but Tom McKaskill argues that in many cases a strategy to building for a strategic trade sale is more appropriate.

Tom suggests:

“If we plan the exit from the outset, the manner in which the business is developed continually keeps the exit in mind and this ensures that we don’t veer off track in terms of meeting our major objective. Some Angels and VC investors do this but they are in the minority.

Now lets get even more radical. Why don’t we change our investment criteria to only focus on investments where we have a high probability of a premium exit. In order to do this, we have to have a very good idea of what creates premium exit conditions, that is, what do we have to do to set up the conditions where a premium exit is highly likely, whether this be an IPO or a trade sale? What would we have to do to make this happen?

Tom spoke very convincingly on this topic at last year’s  Angel Association conference.

INVEST to EXIT is a highly pragmatic strategy for Angel and Venture Capital investors which focuses the investment, business development and harvest activities on strategic value. Investment decisions are targeted towards those ventures which can create a strategic buyer exit. The period of investment is often shorter, operational execution risks are lower and return on investment is higher.

What people are saying about the book:

“Tom McKaskill’s insights into the ‘art of the exit’ provide a great roadmap for all Angel and Venture Capital investors. In a misguided investment world that relies too heavily on IPOs, mega-exits and too much quantitative analysis, McKaskill has taken an enlightened and straightforward approach to a topic that should be foremost on startup investors’ minds.”

Joe Platnick, Pasadena Angels, USA
“For the professional Angel and Venture Capital investor, Invest to Exit is the first book to succinctly capture the importance of aligning the combined interests of inves- tor, management and shareholder when making the investment to produce an optimum result on exit regardless of underlying economic conditions. Commencing exit plan- ning much earlier in a company’s development, combined with planning and then flawless execution will always produce an outcome better than starting later and hop- ing a buyer “will be just around the corner”.

Dr. McKaskill has captured the essence of the issue, providing examples which clearly highlight the challenges and issues faced along the way.

This is compelling reading for investor and companies alike as they work collabora- tively to achieve a superior result when they sell.”

Greg Sitters, Sparkbox Investments Limited, New Zealand

Table of Contents

Preface
Acknowledgements
1 Begin with the end in mind
2 High growth – high risk
3 Spot the IPO
4 Financial vs strategic exits
5 Threats and opportunities
6 Identifying strategic value
7 Finding strategic buyers
8 Enabling the opportunity
9 Reducing risks to the buyer
10 Setting up the exit deal
11 Evaluating potential investments
12 Executing the exit strategy
13 Structuring the trade sale deal
14 Selecting professional advisors
15 Conclusion – impatient capital

Download it now – it may be the most valuable thing you’ve read in a long time.

The angel investment scene is thriving in New Zealand.

That’s my take-out from the inaugural Angel Association NZ summit.  About 80 enthusiastic, committed, and engaged angel investors gathered at the Cable Bay winery for a day of seminars, networking, workshops, networking, debate, networking, food, and more networking.  My biggest regret about the event was that there wasn’t more time for networking.  Seriously.

Luminary speakers Joe Platnick, Stephen Tindall (who quoted my very own Kate Frykberg in his talk), Tom McKaskill and Rob Cameron provided excellent food for thought, while the brilliant culinary team at Cable Bay provided delectable food for the tummy.  I met loads of people with whom I’d only corresponded by email, or knew about through mutual friends before, made many connections and created opportunites for future relationships, and made some new friends too.

The breakout sessions on Building Value in your Portfolio run by Phil McCaw (Movac) and Greg Sitters (Sparkbox), as well as the session on Planning for Exit run by Colin Harvey (Ancare Scientific) and Tom McKaskill were particularly useful.

Phil and Greg built their workshop around key issues raised by the participants, which was a really nice approach.  Phil’s notes for this session can be found in his excellent blog.

Tom’s central thesis was that start-ups should focus on building strategic value for exit, rather than focussing on building a successful business.  The two goals can overlap, but not necessarily. He gave the example of a company he’d built which had virtually no sales revenue and was six months away from insolvency, but had built a product of great strategic value to his chief multinational competitors.  Pick up the phone, create some competitive tension between bidders, and voila – big payday.  Tom made it sound easy, and in order to make this strategy work you’d really need to be adequately resourced and have an appetite for the risks involved; but clearly it worked for Tom.

Both of these sessions underscored the importance of planning for exit before investing, and having clear expectations of value inflection points for everyone concerned.

I went into the conference with the desire to crack a key issue: increasing opportunities for cross-region syndication by angels with similar interests.  Unfortunately, this issue wasn’t formally addressed during the sessions, although I did have a chance to talk about it with a number of different players.

I’ve started an online discussion on the topic in the NZ Angels LinkedIn group.  If you have any ideas, please do contribute to the discussion; if you’re not a member of the LinkedIn group, you’ll need to join first.

In all, the Summit greatly exceeded my expectations; it was educational, created opportunities for new business, and was fun too.  You can’t beat that.