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Metrics like Return on Net Assets, Return on Capital and Internal Rate of Return are the guiding stars of the board and CEO. As Harvard professor Clayton Christensen noted, these efficiency metrics provided wise guidance for times when capital was scarce and raising money was hard. Act Like a Startup.
These groups are adapting or adopting the practices of startups and accelerators – disruption and innovation rather than direct competition, customer development versus more product features, agility and speed versus lowest cost. They measure their success on metrics that reflect success in execution, and they reward execution.
As a consequence, corporations used metrics like return on net assets (RONA), return on capital deployed, and internal rate of return (IRR) to measure efficiency. These metrics make it difficult for a company that wants to invest in long-term innovation. Startups are unencumbered by the status quo.
The good news for Techcrunch readers: Every major study conducted to date has placed angel investors’ IRR between 18 and 38 percent, as summarized by my Partner John Frankel and Professor Robert Wiltbank in prior Techcrunch articles. Every major angel study conducted to date has shown high IRR.
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