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One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days. You can’t just start chasing the shiny new thing every moment something new arises.
One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days. You can’t just start chasing the shiny new thing every moment something new arises.
One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days. You can’t just start chasing the shiny new thing every moment something new arises.
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.
Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited angel investors. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). How large is the financial return you project?
Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited Angel investors. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). How large is the financial return you project?
Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited angel investors. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). How large is the financial return you project?
Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited Angel investors. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). How large is the financial return you project?
Where I don't actually think that's the case is in growth rounds, which seem hyper competitive right now--and where the ability to differentiate yourself as an investor is limited. If you're following on in the A round, then you shed a full 500 basis points on your IRR. Time is the enemy of IRR. 25% of the A's sell for $20mm.
This growth could be a function of product differentiation, go-to-market operations, sheer market size, new geographies, and expansion into adjacent categories. An example of such a business is Salesforce, which defined a new category for SaaS and continues to be a benchmark for SaaS companies to follow. Not too shabby!
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