Up and Running

DECEMBER 22, 2015

My personal favorite in the “pure nonsense category” is the IRR, the Internal Rate of Return , something that was interesting for about one hour as part of the MBA curriculum, but which has no relevance in the real world. Read more of my articles related to this topic: You Can Take That IRR and Shove It.

Angel Investor 60

Angel Investor IRR Software Review Startup 60

Steve Blank

MARCH 4, 2014

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. For most companies it feels like innovation can only happen by exception and heroic efforts, not by design.

IRR 335

IRR Startup Business Model Agile 335

Tim Keane

JANUARY 12, 2010

If you look at the spreadsheet, you will see that the “Required Rate of Return” is expressed as an IRR.   Internal Rates of Return naturally compound, so a 50% IRR is 7.59   (If you plug in an IRR of 58.5%   Internal Rates of Return naturally compound, so a 50% IRR is 7.59 times at 5 years and 11.39

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Steve Blank

JUNE 11, 2013

And what are its costs? What is an IRR? How do we attract, keep and grow customers? What are revenue strategy and pricing tactics? Who are the partners? What are the resources and activities needed to make this business happen? Who to take money from? First, decide what type of startup you are. How long is a fund’s life?

Venture Capital 335

Venture Capital IRR Liquidity Event Business Model 335

Startup Professionals Musings

APRIL 3, 2012

Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). Expected return rate. Most venture capitalists tell you that they look for 30% annual return, or 10 times initial investment in 3-5 years. It’s easy to take any money that’s green, but in the end it can be more costly than it’s worth. Marty Zwilling.

IRR 248

IRR Term Sheet Startup Valuation 248

Startup Professionals Musings

NOVEMBER 11, 2010

Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). Expected return rate. Most venture capitalists tell you that they look for 30% annual return, or 10 times initial investment in 3-5 years. It’s easy to take any money that’s green, but in the end it can be more costly than it’s worth. Marty Zwilling.

IRR 225

IRR Startup Term Sheet Angel Investor 225

Steve Blank

JUNE 23, 2016

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. On the low-end, they undercut cost structures, resulting in customer migration. These metrics make it difficult for a company that wants to invest in long-term innovation.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

View from Seed

JULY 15, 2020

Mid-stage portfolios can be more acutely impacted if many companies have fat cost structures and were investing heavily in growth that is not materializing. This may not hurt the ultimate exit value of these companies, but the passage of time will hurt the fund’s ultimate IRR. Reshuffling the deck.

Portfolio 215

Portfolio IRR Dilution Distribution 215

Steve Blank

JUNE 11, 2013

And what are its costs? What is an IRR? How do we attract, keep and grow customers? What are revenue strategy and pricing tactics? Who are the partners? What are the resources and activities needed to make this business happen? Who to take money from? First, decide what type of startup you are. How long is a fund’s life?

Venture Capital 227

Venture Capital IRR Liquidity Event Business Model 227

David Teten

NOVEMBER 17, 2011

In my previous life as an investment banking analyst at Citi (Latin America industrials group), we used to spend hours deriving the appropriate weighted average cost of capital (WACC) for a particular company. We used to take medians and means of unlevered betas of different subsets of comparable companies.

Employee 155

Employee IRR Startup Mexico 155

David Teten

MAY 8, 2012

As Steve Case has said, it’s ridiculous that anyone can gamble and be guaranteed to lose money, but there are strict regulations around who can invest in early-stage private companies and earn (in some cases) a 27% IRR on their capital. *. The Entrepreneurs Access to Capital Act helps to redress this. Start now! *

Securities and Exchange Commission 148

Securities and Exchange Commission IRR Entrepreneur Angel Investor 148

Both Sides of the Table

MAY 19, 2018

A detailed financial model that shows your anticipated revenue, costs and profits (Income Statement) as well as your balance sheet and cashflow statements. These collective sets of documents form the basis of what somebody looking at investing would call “financial due diligence.”

Cap Table 336

Cap Table Due Diligence Forecast Churn Rate 336

Startup Professionals Musings

FEBRUARY 5, 2018

Today as companies use tools to collect massive amounts of data on desired consumers, brands are able to increasingly market to very specific groups of people, at less cost. The cost of time is increasing, and less time increases your odds of success. Investors measure their success by looking at the internal rate of return (IRR).

IRR 143

IRR Marketing Startup Angel Investor 143

Up and Running

MAY 2, 2012

But don’t quote me a damned IRR. I’ll judge your projections for realism and credibility, but that’s sales, costs, expenses, cash flow, and other basic numbers. But both of those calculations are based on five years (or so) of future cash flows. Not discounted cash flow. . Big market “facts.”

Net Present Value 142

Net Present Value IRR Texas Global 142

The Equity Kicker

MAY 27, 2015

fund expenses are largely composed of investors’ salaries and office costs, above a certain level higher salaries and nicer offices don’t translate into better performance. The definitive answer to these questions will come over time as our portfolio matures, our companies exit, and we can demonstrate a high cash to cash IRR.

Cost 60

Cost IRR Private Equity Salary 60

Up and Running

JUNE 17, 2013

And Internal Rate of Return (IRR)? Come on, I went to business school too, and I know the academics like it, but it depends on a realistic sales projection, realistic costs and expenses, plus a discount rate … so many unknowns. Finance angel investment IRR ROI venture capital' I trust my judgment on that.

IRR 71

IRR Flash Angel Investor Venture Capital 71

The Next Web

DECEMBER 16, 2012

Income-based valuations consider aspects like CAPM (capital asset pricing model), IRR (internal rate of return), NPV (net present value), WACC (weighted average cost of capital), NCF (net cash flow), and GAAP (generally accepted accounting principles). The quality, reliability and cost of site traffic. Asset approach.

Valuation 128

Valuation NPV Net Present Value IRR 128

crowdSPRING Blog

AUGUST 7, 2011

Cost of capital may increase. The distinct likelihood of higher interest rates means that small business loans will cost more and that credit will be tightened making loans less available to businesses. Businesses large and small will continue to struggle as long as demand is soft and business budgets are constrained.

Small Business 86

Small Business IRR Government United States 86

This is going to be BIG.

JULY 30, 2015

Second, their dollars dollar cost average at cheaper entry prices. Here's another way to look at it--the cost of capital argument. So, if that was the case, and the market was competitive, why wouldn't each VC be bidding up a round up until the point where they could get the return that matches their own cost of capital?

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

Growthink Blog

MAY 21, 2014

One reader reference Gust Founder David Rose’s new book - “ Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups ” and to Rose’s main contention that to access the 25% IRR potential of the asset class one must hold positions in not less than 20 companies. He asked, “ Is this practical advice?

San Diego 72

San Diego Warrant IRR Investment Bankers 72

abovethecrowd.com

APRIL 20, 2016

In Silicon Valley boardrooms, where “growth at all costs” had been the mantra for many years, people began to imagine a world where the cost of capital could rise dramatically, and profits could come back in vogue. Do you feel the need to raise more capital quickly before the prices erode further and bring down your IRR?

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

David Teten

AUGUST 21, 2019

Lower processing cost. Much lower cost of capital, if company is highly successful. The cost of VC funding to a unicorn CEO can easily be the equivalent of paying well over 100% annual interest. The RBI investor is motivated to help the company grow because that speeds up the pace of revenue payback, and therefore IRR.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Occam's Razor

OCTOBER 14, 2014

Leaders (company is leaving China, our IPO is next week, 1,800 new stores are being opened in 180 days, our new IRR is 8%). Hence, over time, though the costs were reasonable, I've become shy about these resources as a source of value/quality. Any big shifts in investment (marketing, customer experience, team sizes, tools).

Analytics 135

Analytics Vertical Metrics Web 135

Hunter Walker

MARCH 17, 2025

No reason to sell winners prematurely just because of original fund length, especially given our LPs are largely cash-on-cash return focused more than IRR. Standard Asks/Approvals Extensions on fund length as needed – everyone knows its taking longer to get liquid.

IRR 84

IRR LP Institutional Investors Portfolio 84

David Teten

NOVEMBER 23, 2020

I highlight endogenous social impact because many of my portfolio companies might give money to charity or provide low-cost pricing to nonprofits, but that’s not what I think of as an impact company; they’re tacking on social impact on top of their core business, whatever that is. . Starship was launched by the co-founders of Skype.

Venture Capital 60

Venture Capital Partner Technical Review Cofounder 60