VC Adventure

MAY 5, 2022

I’m observing that IRR is a metric that is becoming an increasing focus in venture, replacing fund return multiple as the key metric of success. I understand the draw of IRR, and – as a fund draws to a close – there’s no question it’s an important metric. Recycling hurts IRR. This is a mistake.

IRR 116

IRR Metrics Valuation LP 116

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

Staff functions in finance, human resources, legal departments and business units developed Key Performance Indicators, processes, procedures and goals to measure, control and execute. Finance The goals for public companies are driven primarily by financial Key Performance Indicators (KPI’s). This is a big idea.

IRR 335

IRR Startup Business Model Agile 335

David Teten

JANUARY 19, 2021

Part of the magic of revenue-based financing is how historical performance and strong, achievable financial projections are ultimately the backbone of how RBI/RBF investment decisions are made.” 20-30% is a common target IRR for investors. Further reading: The Evolution of Entrepreneurial Finance: A New Typology.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Tim Keane

JANUARY 12, 2010

For angel groups, the distinction between groups and VCs on this issue is dwindling, especially as angel groups do bigger rounds of financing.   Note that this applies only to earl stage Series A-type equity financings and assumes no cash dividends are paid to investors.   (If you plug in an IRR of 58.5%

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

Startup Professionals Musings

APRIL 3, 2012

Angels are typically high net-worth individuals, investing their own money, interested more in early or “seed” financing of amounts starting as low as $25K. Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). The basics are simple. Expected return rate.

IRR 248

IRR Term Sheet Startup Valuation 248

Both Sides of the Table

MAY 24, 2021

This “overnight success” was first financed in 2004. as measured by MOIC, TVPI and IRR and by sources that don’t reveal the underlying data and who themselves have to rely on incomplete datasets. This is true in consumer but it’s also true in enterprise software. Imagine if, say, Autodesk had purchased it in 2009 for $100 million?

Venture Capital 363

Venture Capital LP Valuation Later Stage 363

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. Second, the leaders of these companies tended to be those who excelled at finance, supply chain or production. They knew how to execute the current business model.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

Startup Professionals Musings

NOVEMBER 11, 2010

Angels are typically high net-worth individuals, investing their own money, interested more in early or “seed” financing of amounts starting as low as $25K. Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). The basics are simple. Expected return rate.

IRR 225

IRR Startup Term Sheet Angel Investor 225

Startup Professionals Musings

MAY 9, 2011

I also spend close to half my time teaching, and in addition to serving on the entrepreneurship advisory boards at Columbia, Yale and NYU, I am Chair of the Finance, Entrepreneurship and Economics program at Singularity University in Silicon Valley. Marty: Were your own first investment ventures a positive and learning experience?

New York 221

New York Accredited Investor Advisory Board IRR 221

VC Adventure

AUGUST 12, 2014

Correlation Ventures just released a study that shows the distribution of outcomes across over 21,000 financings and spanning the years 20014-2013. Based on their data, a full 65% of financings fail to return 1x capital. The result is that they process a lot of data. Which leads to some pretty interested insights.

IRR 133

IRR Portfolio Distribution Venture Capital 133

VC Adventure

AUGUST 12, 2014

Correlation Ventures just released a study that shows the distribution of outcomes across over 21,000 financings and spanning the years 20014-2013. Based on their data, a full 65% of financings fail to return 1x capital. The result is that they process a lot of data. Which leads to some pretty interested insights.

IRR 122

IRR Portfolio Distribution Finance 122

David Teten

NOVEMBER 17, 2011

I’ve often found it helpful to have on hand a simple model showing the impact of each financing stages on all team members, suitable for sharing with everyone in the company. By definition, IRR is calculated using amount invested, amount received at some point in the future, and time passed between the two cash flows.

Employee 155

Employee IRR Startup Mexico 155

View from Seed

JULY 15, 2020

Many of these companies are probably valued at their last financing round, which probably occurred in a very frothy funding environment. 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

Professor VC

MARCH 10, 2009

His latest venture, Bharosa, was sold to Oracle for a 6X multiple in 3 years to his angel investors, a sweet close to triple digit IRR. I take CFO roles in early stage companies and participate on the management team during the early financings and business model development phases.

Bootstrapping 28

Bootstrapping San Jose Silicon Valley Angel Investor 28

This is going to be BIG.

DECEMBER 28, 2013

Since Airbnb, however, it feels like not only is YC missing another billion dollar plus home run, but the percent of companies worth $40 million (a standard YC has used in the press), either by financing or exit, seems low. My total valuation multiple across that span is nearly 4x and the return rate is up over 110% IRR. That''s 25%.

Venture Capital 164

Venture Capital Cofounder IRR Dilution 164

Up and Running

JUNE 17, 2013

And Internal Rate of Return (IRR)? Finance angel investment IRR ROI venture capital' I’ll look at your plan instead and figure out what I think you can do. I trust my judgment on that. It’s a complete waste of time. It isn’t helping them.

IRR 71

IRR Flash Angel Investor Venture Capital 71

Professor VC

JANUARY 17, 2008

If my math is correct, this is approximately a 31% IRR, which has to beat individual angel investments on aggregate and venture capital returns over the period of the study (1990-2007). He then went on to say that this type of financing was good for the entrepreneur (vs taking VC money) because they got to keep more of the company.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

abovethecrowd.com

APRIL 20, 2016

Why the Unicorn Financing Market Just Became Dangerous…For All Involved. By the first quarter of 2016, the late-stage financing market had changed materially. Investors were becoming nervous and were no longer willing to underwrite new Unicorn-level financings at the drop of a hat. This is uncharted territory.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40

Agile VC

NOVEMBER 13, 2012

The IPO market remained closed to IT startups, but there were big acquisitions like Google buying YouTube for $1.65B (Fall 2006) and late stage financing rounds for companies like Facebook (Microsoft round at $15B valuation in Fall 2007). typically, which in most cases would to >20% IRR. So at a fund level (e.g.

LP 154

LP Portfolio Venture Capital IRR 154

K9 Ventures

MAY 14, 2011

As fiduciaries, the general partners of the uVC funds have to begin to focus on the dreaded VC I-word : IRR. The Series A is now the third round of financing for a company, but the nomenclature hasn’t been changed. This also changes the types of deal terms that micro-VCs will undertake. The cycle will continue, as it inevitably does.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

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

K9 Ventures

NOVEMBER 30, 2008

The birth of modern-day venture capital (not considering the European monarchs financing explorations and projects as venture capital) can be traced back to American Research and Development, which was started by Georges Doriot. For what I’ve seen/heard the tops VC funds typically have an IRR of over 20%.

IRR 48

IRR Venture Capital LP Early Stage 48

Feld Thoughts

APRIL 21, 2016

Bill Gurley wrote an incredible post yesterday titled On the Road to Recap: Why the unicorn financing market just became dangerous … for all involved. As Bill points out, many funds are sitting on huge paper gains which translate into large TVPI, MOC, gross IRR, or whatever the current trendy way to measure things are.

Marketing 70

Marketing Down Round Startup IRR 70

David Teten

AUGUST 21, 2019

Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. The RBI investor is motivated to help the company grow because that speeds up the pace of revenue payback, and therefore IRR. Most founders who are raising capital look first to traditional equity VCs.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Ben's Blog

AUGUST 17, 2020

The conventional wisdom finance professionals are often taught is that you should not pay a higher multiple today than what you’d expect to be paid upon exit — that is, your entry multiple should equal your exit multiple. Not too shabby!

Valuation 36

Valuation Balance Sheet Cofounder Forecast 36

Occam's Razor

OCTOBER 14, 2014

Outcomes of the conversations with your Finance team and Sr. 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%). Any big shifts in investment (marketing, customer experience, team sizes, tools). And other such things.

Analytics 135

Analytics Vertical Metrics Web 135

Feld Thoughts

AUGUST 1, 2018

We are very long-term investors, focusing on net cash on cash returns, rather than short-term or intermediate IRRs. We refer to B and C rounds as early growth – essentially financings with valuations between $50m and $300m pre-money. Our goal is to have significant ownership in companies we are investors in (often over 30%).

Syndicate 17

Syndicate Syndication IRR Canada 17

David Teten

NOVEMBER 23, 2020

. – Indiegogo.com is a crowd-funding platform allowing contributors to empower hundreds of thousands of inventors, musicians, do-gooders, filmmakers – and many more – to bring their dreams to life. – Clarity.com proactively advises you on managing your personal finances efficiently. Goldman Sachs bought Clarity for ~$100m. .

Venture Capital 60

Venture Capital Partner Technical Review Cofounder 60