After 10 years, my $60,000 investment in a private gin company finally paid dividends. Initially, given the company was sold for about $49M after expenses and I had invested in the company at a $10M post money valuation, I was thinking I had made a ~3X return ($180,000). Since over time shareholders get diluted with subsequent funding rounds, I thought that was a reasonable assumption.
Well it turns out I didn’t come close. Instead, here’s what I got:
Gross Proceeds: $98,425.88
Federal Withholdings: $0
State Withholdings: $6,523.82
Net Proceeds: $91,902.07
What the hell!? After almost 10 years, with $98,425.88 in gross proceeds, I only made a 64% return on my money (1.64X). Further, I had ZERO liquidity and lost hope for years that I’d ever get my $60,000 back. Doing the math, I only made a 5.1% IRR, barely better than my guaranteed 4.1% 7-year CD that just expired.
So where did all the money go since the company was sold for 5X what I bought in for? Based on an internal document I received, we had to pay a lot of banker, lawyer, escrow, accounting, and general administration fees. We also had to pay severance packages to all the employees (rightfully so) who were made redundant when the parent company took over. But there must be something else I’m missing, which I’ll investigate further in due time.
Despite the missing money, I consider myself LUCKY to get any money back because most startups fail miserably. Before Campari announced the acquisition, I had already written off the $60,000 because shareholders had never gotten a dividend and the growth target dates kept on getting pushed out. My concern was the company would turn into one of those zombie companies with just enough growth to maintain EBITDA break even, but never enough growth to become an attractive acquisition target.
When the purchase price was announced, my write-off expectation transformed into greed. And now with the payout, my greed has turned into selfish disappointment.