By Scott Meacham
Copyright © 2019, The Oklahoman
Profitable exits are the holy grail of venture investing. The reason is fairly obvious. It typically takes an exit event for equity investors to get their original investment back and to gain the benefit of any returns. A successful liquidity event distributes the funds for venture investors to put into the next deal.
What may be less obvious is that there are multiple “successful” ways for a startup to “exit.” From initial public offerings to mergers and acquisitions, to new investment rounds, to the sale of intellectual property, there are multiple paths to tapping into that well.
Across the industry, 2018 was an exceptionally strong year for venture capital-backed exits. According to PitchBook, more than $120 billion was exited across 864 exits. Also, the most VC-backed companies entered the public markets since 2014, but as favorable as the trend is — that was still only 190 IPOs. Nationally, as is more likely in Oklahoma, mergers and acquisitions lead as the largest portion of exits.
In December, two of our companies “exited” differently, both a successful outcome.
The first is an example of the reality that I call “sometimes you have a company, and sometimes you have a product.”
Synercon Technologies commercialized a technology out of the University of Tulsa into a hardware/software solution designed to make it easier to recover crash data. The solution would allow traffic crash investigators to quickly acquire digital “blackbox” data from a heavy vehicle crash.
Synercon tried to build a company around the product then eventually sold the company and its technology to an industry partner who could do more with it in the context of their broader business. There was a positive return and experience gained all around in spinning out technology from one of Oklahoma’s outstanding academic institutions. There is now the opportunity for a more established company to take the technology from where it is forward in the marketplace. In my book, this is a win.
In another example (it’s too early to share the name), we are exiting from another portfolio company as a much larger, out-of-state private equity fund is investing significant capital to take that company forward. The startup is planning to stay in Oklahoma, just moved into a new headquarters building and is continuing to add employees and customers.
Figuring out the value of a startup business is a critical aspect of the alchemy of innovation. Realizing that value — whether through IPO, acquisition or a different exit path — contributes to a statewide environment of problem-solving and creativity and sets a cornerstone for Oklahoma’s innovation strategy.
Scott Meacham is president and CEO of i2E Inc., a nonprofit corporation that mentors many of the state’s technology-based startup companies. i2E receives state appropriations from the Oklahoma Center for the Advancement of Science and Technology. Contact Meacham at i2E_ [email protected].