Following up from our previous post ‘How Venture Capitalists Don’t Really Play the Role We Believe‘, I also observe as a Business Angel that the typical 5 to 7 years’ time expectation of investors, and investment funds in particular, is not always consistent with the time-frame for developing an innovative company.
As a Business Angel with industry experience I have a specific tendency to invest in start-ups that develop tangible innovative products mostly in B2B situations. For those start-up companies, between developing the technology in a sufficiently mature stage, the decision cycle of industrial managers and the time to effectively setup the hardware, the usual investment cycle of 5 to 7 years will often be too short to demonstrate the full value of the company. A horizon on the order of 10 years may be more realistic.
The 5 to 7 years horizon may be more suitable to virtual products in B2C mode and effectively in that space, this time-frame is often sufficient to show the value of the innovation.
I am a bit unclear whether this difference in startup situation is well appreciated by investors and there may be many cases where industrial start-ups will be forced to take decisions that are not supportive of their development after 5 to 7 years because many investors will want to leave at that point.
