J Curve and Hype Cycle

1. The Hype Cycle

2. The J-Curve (For J-Curve for Venture Startups)

Exit Point 1 -> Circa 2006. $5M-$20M exits. Acquired for technology, promise, users, eyeballs.

Chasm -> Circa 2008 or 2002. Cram down financing. Sky’s falling. Can’t pay me to take it off your hand. Men separated from boys.

Exit Point 2 -> book value = equity value. $10M - $50M exits. The long road back.

Exit Point 3 -> IPO Baby!

Question . . . how long does it take to go from founding to point 3 usually? 7-10 years?

Question . . . whats the annualized ROI? or IRR of the various exit points?

Question . . . given time required and effort invested AND risk adjusted for likelihood of failure in each step . . . where should most investors/entrepreneurs focus their exit strategy?

EDIT: Answers to above questions from Nemo

Answer… 8.5~9yrs (median time from initial equity to IPO is 8.3 yrs. Source: DJ VentureSource Q3 08 survey)

Answer…
Exit #1: 2~4x, 50~150% IRR (assuming 1.5~2yr hold, 1~2 rounds)
Exit #2: 2~4x, 30~70% IRR (assuming 3~5yr hold, 2~3 rounds)
Exit #3: 10~100x, 30~70% IRR

Answer… Exit #1. can you say cetacean celebrity?