Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II (Part 10)

By guest authors Irina Patterson and Candice Arnold

Irina: Now, we can talk about your favorite subject, which is exits.

Basil: Yes, again, I often go on for a whole day on that subject.

I think that it’s also not well understood, but we’ve just gone through a time where the model has changed very quickly.

In the past ten years, the fundamental economics of entrepreneurship have changed, and the result today in 2010 is that I believe that we are in a golden era for technology entrepreneurs and technology investors.

I believe that never before has it been so easy for entrepreneurs to build companies on so little capital and to sell them so early for so much money. Never before in history has it been this easy to make a lot of money as an entrepreneur.

Like a lot of things that have happened in our history, when it’s happening to people, they often don’t see it because they’re living it. They’re in the middle of it. But I think when history is written, in say 2050, they will talk about the early part of the 21st century being a golden era for entrepreneurship.

There are a couple of reasons why that is the case. Let’s take technology. I’m a tech guy, so I always want to make sure I’m talking about technology here. The Internet has changed our species, has changed mankind more than any other previous innovation – more than air travel, more than the telephone, more than electricity, more than railroads, and more than farming.

This really has been the biggest change so far in our species. This new technology has created enormous opportunities for entrepreneurs to find new business models, to build valuable companies on very little capital, and sell them for often millions of dollars just a couple years after they were started. That has never happened before in history.

Another thing that’s happened at the same time is that there’s never been as much demand to acquire small and medium-sized companies. In America, big companies suck at innovation. I’m borrowing that from Josh Kopelman. He said that first; I think it’s just such a perfect phrase.

And not only that, they also know that they suck at innovation. Big companies don’t succeed very often in building new ideas from zero to $10 million, $20 million, or $30 million in value.

They’re not good at that. But what big companies are starting to understand is that they’re very good at taking businesses from $10 million, $20 million, or $30 million and making them worth $100 million, $200 million, $300 million, or $1 billion. That’s what big companies are good at and these big companies have lots of capital, billions of dollars. It’s actually a problem for most big companies.

So, what the big companies are doing because it’s what works for them is they’re buying small innovative companies as fast as they can. They would buy more if there were more out there to buy. And they have basically unlimited amounts of capital available to buy these companies. Today, as fast as the entrepreneurs can build them, they could sell them – if they knew how. It’s just a wonderful time where everything is kind of lining up to encourage entrepreneurs to start things, grow them on small amounts of capital, and sell them early.

This segment is part 10 in the series : Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II
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