Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II (Part 11)

By guest authors Irina Patterson and Candice Arnold

Irina: I saw you tweeted that Google wants to buy pre-revenue companies.

Basil: Yes. I was fascinated to hear Charles Rim,  who’s one of the top five guys at Google who buys companies, said that on a webinar, M&A class, offered by a group called Corum. Yes, he said that.

And it’s not just Google; all of the big companies are saying the same kind of things. I don’t know whether he meant literally pre-revenue or whether pre-significant revenue. I suspect that what he meant was under $1 million dollars of revenue.

If you’re Google, under $1 million is pretty close to zero, so that’s like pre-revenue. But what he was saying and what he was more clear about is that the sweet spot is around $20 million.

That’s fascinating, because Google is one of the biggest companies in the world right now. They also have one of the biggest cash hoards in the world, and what they want is they want to buy companies for $10 million or $20 million. That’s what is easy to sell today, and that’s what I think 99%, maybe 99-point something percent of entrepreneurs should be focusing on. That’s the easy, quick way to make money today at the early part of the 21st century.

Irina: With your fund, what is your preferred exit strategy?

Basil: Under three years, is my hope. Now, sometimes it takes a little bit longer, but under three years [is ideal]. It’s not just me; I think that angel investors in general – all investors, except traditional venture capital investors – are more interested in liquidity today than they have been maybe at any other time in history. The reason is that we all are seeing that the financial world is less stable than we used to think of it.

When you see companies such as Lehman Brothers – one quarter they’re declaring record earnings and two quarters later they’re bankrupt – when you see that kind of instability in the system, investors get more short-term in their thinking.

If you go to an angel investor today – any of the ones that I know – and you say, I want you to invest in my company for ten or twelve years before you can get your money back, she won’t do it.

There’s probably one angel in 100 who will be OK with going in knowing it’s going to be ten or twelve years before he can exit.

Irina: How do you feel about dividends?

Basil: Oh, I like dividends fine, but it’s a very rare company that produces dividends – in technology – I’m a technology person. If it’s a property management company, if it’s a property company, they dividend all the time but for tech companies, it’s very rare. Dividends are good.

This segment is part 11 in the series : Seed Capital From Angel Investors: Basil Peters, CEO and Fund Manager, Fundamental Technologies II
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