I have a internet business and things are going pretty well. We are selling some types of digital products in the 'creative field' (can't get into more detail here, sorry). The business has been self funded with around 600K USD.
After two years, we are only below 500K USD in annual sales, but we 're almost profitable and building a 2nd website to cater to the same audience. We hope to grow to 800K to one million of annual revenue in 2 years. We are thinking of getting VC money (one to two million) and we are already in touch with someone who is interested.
I am confident that we can do well in this market, but our market is not big enough for an IPO. And potential buyers are a very limited number of companies and not that huge (there have been a few exits in our field however).
I 'm no sure we can ever grow the business to more than 4, 5 or 6 million USD in annual revenue. But VC money would position us really well in the market and secure our success up to a certain degree. I wouldn't mind having a 'medium/ small' sized company and receiving profits anally, rather than chasing a really fast growth and exit. And of course I would be glad sharing a part of those profits with our investors/ VCs.
My main question is what happens if we get stuck at lets say two million in sales and we 're profitable? Will the VCs close us down and sell the assets?
Since the VC was looking for an exit, they will consider it a failure. I 've heard about companies selling the assets and closing down. But I 've also heard of stories of companies still running with small sales after 12 years without an exit and the VCs just don't care anymore. Do VCs close you down? If their investment is 'illiquid', do they prefer selling the assets and can they usually force this under standard terms?
What do you think? Please keep in mind that I would never mention the above concerns to VCs. But I would like to grow the business with a fast cash injection. I do not want to trick them- there have been some exits in our field (companies sold for 30, 40, 50 million).
But I want to research as to what happens if we get stuck at one or two million in annual sales and can't see an exit, but we 're profitable?
Is it an ugly situation having a minority shareholder if you can't make an exit? What do you think about this strategy?
Thanks a lot for reading a really long question.