Russ: Hi, I’m Russ Capper at Alpha Conference, and my guest today: Basil Peters, Founder and CEO of Strategic Exits and Author of Early Exits. Basil, welcome to the show.

Basil: Thanks, Russ. Thanks for having me.

Russ: You bet. So, so much focus on exits. How long have you been doing that?

Basil: I’ve been doing it since I sold my first company, the company I started in grad school, and I became an investor and as soon as I started to make investments I started to realize that not only was I not very good, but we as a category of investors weren’t very good at designing and executing the exit.

Russ: Well, from my perspective and my experience that’s a very valuable category that you’re addressing, but it’s a business show, so how does Strategic Exits make money?

Basil: Strategic Exits is a boutique investment banking firm that specializes exclusively in M&A advisory work for companies that want to be sold. So, we only work for sellers, we never work for buyers. Part of the reason is that I want to keep my own thinking and my team pure in just doing one thing because we aspire to be the best in the world at that one thing.

Russ: Ok, well doing that one thing that you do, at least from my perspective, is perhaps the most important thing to do for a small business, a startup business that’s aiming for success.

Basil: It’s arguably the most important, but I think it’s clearly the part that we do the least well. It’s critically important that we do it well because the whole economy now is based on innovation. It requires entrepreneurs and angels to be successful so that they can go on and do it multiple times in a career.  So, if the angels aren’t making any money, at some point they’re going to get tired of investing and we’re going to lose what is now I think the most critical source of new capital in our economy.

Russ: Ok, and that’s angel capital is what you’re talking about.

Basil: Absolutely, yes.  So, today what’s happened is the economy has changed, and instead of the most likely successful outcome being venture capital funding and an IPO, the probabilities to more than 95 percentile are angel investing to an M&A transaction.  What I believe, have come to believe after making a lot of mistakes myself as an entrepreneur, and then a lot of mistakes as an angel investor, I’ve come to believe that it’s critically important for companies to have an exit strategy, a clear exit strategy with alignment, from much earlier in the companies history than we ever appreciated before. In fact, I believe in an ideal situation companies would have a clear exit strategy before they develop their financing plan and before they started to speak to investors. I have to admit, that does not happen very often, but I think if we could get that message out there, then we’d have more successes, we’d have more wealthy entrepreneurs, more wealthy angels, and a faster growing economy.

Russ: And you personally, I mean, you still make investments today, right?

Basil: I do, yes.

Russ: And you think the happening space is life sciences.

Basil: Definitely.  You know, I grew up in a time when traditional IT tech was exciting. I remember when the first integrated circuits came out, that’s how old I am.  Of course, that was the birth of the whole computer industry, that created the internet, I mean it’s changed our species more than any other single technology. To me, today, what’s exciting is the life sciences. For me, when we got to the point of being able to sequence the human genome, not only sequence it but to be able to buy your own genome online for a hundred dollars from 23andMe, and to get back the raw data, that was for me the beginnings of what I know is going to be a much bigger change than the invention of the integrated circuit. We’re just at the early stages, I think there’s many, many decades ahead where not only the sequencing of the genome, but all of the other technologies which are just coming online at the same time. And life sciences are going to change our world more than any of us can imagine.

Russ: I totally agree, as a matter of fact, that’s why we’re here at the Alpha Conference. Let’s say that we have a startup life sciences entrepreneur watching right now, and he or she is real excited about what they’re doing, they’re real optimistic about the future, but they haven’t given any thought to the exit strategy, and they might not have even raised any money yet. What would you tell them to do to be thinking in the right direction at this time?

Basil: A couple of quick, easy answers. One of them is to learn as much as you can, not just about your business, but to learn about the economic system in which you’re operating. I didn’t do that when I was a young entrepreneur. In fact, I didn’t do it when I was a young angel investor either, but I’ve come to appreciate how important the macroscopic environment is. Realistically, I don’t think a lot of entrepreneurs are going to have the time to do that. So, instead I think the best advice I can give is to find some really good mentors. The wonderful thing for young entrepreneurs today is that the boomer demographic are moving solidly into their angel investing years, and there’s a lot of guys that have gray hair like you and I do who have had a lot of experience who are quite happy to provide the benefit of some of that accumulated wisdom and entrepreneurial scar tissue along with some capital to help some young people succeed.  So, I think almost universally, entrepreneurs that are successful have found and taken advantage of the free gift of that wisdom and experience that mentors will offer.

I think angels have a real opportunity especially to help with the exit strategy because most entrepreneurs haven’t had very many successful exits. I can say that because I know that people that I know that have had a couple of successful exits, they’re not entrepreneurs anymore, they’re angel investors. So, I think the angel investors are the ones that have the experience that can share that with the entrepreneurs and help get them structured and financed properly, help to build that alignment on the exit strategy, which I believe will dramatically increase the probabilities of not only having a good exit but having a high quality exit as well.

Russ: Basil, I really appreciate you sharing your expertise with us.

Basil: Thank you.

Russ: You bet. And that wraps up my discussion with Basil Peters, the Founder and CEO of Strategic Exits and the Author of Early Exits.