Angel Investors and Artists: Harvesting

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Photo by Karly Santiago on Unsplash

When it comes time for harvesting a business, there is a sense of holding one’s breath in anticipationd, waiting for the magic to rain money from sky. Or at least that is how I envision the harvesting process. There is one crucial thing that determines harvesting, a magic word, if you will. The entrepreneur must be willing to EXIT.

That said, there is an inherent difficulty in planning a lucrative exit in an arts-based business that relies on the creativity of the founder. Just as there can be issues surrounding control with angel investors, there can also be issues surrounding how to grow the business beyond the creative entrepreneur. The entrepreneur must be willing to relinquish a certain amount of control in order to create market opportunity. Otherwise the business will likely never have a chance at a lucrative exit for investors.

In Winning Angels: The 7 Fundamentals of Early Stage Investments, authors Amis and Stevenson state that “harvesting is the endgame of early-stage investments” (287).

“Perhaps the best impact an angel can have here is to facilitate the interaction between potential buyers, bankers and others that could provide an exit event for the angel and entrepreneur” (Amis & Stevenson, 287).

Short of filing Chapter 11 or Chapter 7 bankruptcy, most other harvesting methods will create a measure of success for the stakeholders. If the company is performing poorly, sometimes these less than ideal exit strategies become the best choice. Amis and Stevenson state “strategic sales are the most common harvest method, followed by financial sales, and IPOs (initial public offerings) which are rare” (323). If an entrepreneur is willing to harvest the business, the angel investor can leverage connections to venture capitalists to find the right kind of exit. Venture capitalists are professional harvesters, keen on creating lucrative exits for stakeholders. If the entrepreneur and angel investor planned for harvesting early in the start-up process, then venture capital should be quite welcome. All the hard work creating the business, building relationships, and weathering the storms of a growing a start-up will have their reward for the angel investor, and hopefully the entrepreneur as well.

 

 

7 thoughts on “Angel Investors and Artists: Harvesting

  1. I can’t help thinking after all that we have read this semester that getting to the harvest section would be next to impossible. There is so much to navigate to even get to this point, and then making a clean exit that benefits the entrepreneur and the investor seems unlikely. I can’t imagine being an angel investor. You would have to have some serious patience’s and positive thinking. I hadn’t thought about an arts based business, but you are right. how do you sell a company that is solely linked creatively with an artist. Other than selling the rights to your past work it would be a hard task.

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  2. Harvest season is the best part right?! At least for me, the exit strategy has to be a part of the initial plan. I believe I am ready and willing to walk away from a well developed and successful business. In the evaluation process, I think it’s important to understand or predict when is the ideal time to walk away and with what. Maybe it’s a lump sum or shares and dividends. Whatever it is, I think it’s important to keep that mark in mind. It helps with not getting lost in the highs and lows of business. If a business is doing extremely well, sometimes people may choose to hold on a little longer, which can be dangerous. How much of the harvest are you willing to risk for a potentially larger return?

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  3. Hey Joy,

    I found this post to be helpful to shape my thinking a bit after reading this chapter. Developing knowledge of the methods of harvesting will ultimately help us be able to figure out what we need to do or what we want to do to make more with investments. I believe that Amis and Stevenson did an excellent job are acknowledging the various types of harvest methods and you were able to break down their writing really well to where I could make more sense of it.

    I think that Dexter added some very interesting things to think about with his response!

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  4. Joy,
    It’s interesting to think about founders with specialized expertise like the arts business, and that investors skilled in the arts may be few and far between. I know at one point in time you had mentioned an interest in whether a nonprofit startup might be a good approach, which is definitely a common path for the arts. However, you also have some great ideas related to generating revenue as an artist, and a strong business mind. Either way, I think you could expand the business to a level that others might want to partner or buy the company, or you’d find another creative entrepreneur to take over if you’re ready to exit.

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  5. This was a very daunting section for me to write about, you did a wonderful job of discussing the topic of harvesting/exit strategies. What was interesting is how much reading about this opened my eyes to the fact that in some cases businesses will have to fold or file for bankruptcy, which is a huge negative for not just the business owner and entrepreneur but also for the angel investor. I also did not think about the fact that many businesses sale the company as an exit strategy, when I thought about harvesting before reading this section, I was really only thinking about the stock side of things! I especially like that in your whole blog series you related this to your business and industry, art. I think you are going to do great things Joy, I mean look at you, you already are. Very good work and thank you for your interesting break downs on the different topics, I can not wait to see your contributions in the next course on our next book!

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