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

Steve Blank

MARCH 31, 2014

Companies horde cash and squeeze the most revenue and margin from the money they use. Metrics like Return on Net Assets, Return on Capital and Internal Rate of Return are the guiding stars of the board and CEO. Instead of measuring success in dollars of profit, …firms focus on measuring capital efficiency.

Private Equity 328

Private Equity Metrics China Intellectual Property 328

Steve Blank

MARCH 4, 2014

A consequence of using these corporate finance metrics like RONA and IRR is that it ‘s a lot easier to get these numbers to look great by 1) outsourcing everything, 2) getting assets off the balance sheet and 3) only investing in things that pay off fast. Corporate KPI’s, Policy and Procedures: Innovation Killers.

IRR 335

IRR Startup Business Model Agile 335

David Teten

AUGUST 21, 2019

Or should they look to one of the new wave of Revenue-Based Investors? Revenue-Based Investing (“RBI”) is a new form of VC financing, distinct from the preferred equity structure most VCs use. For more background, see Revenue-Based Investing: A New Option for Founders who Care About Control. But should they? Aligned incentives.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

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. Intel under their last two CEOs delivered more revenue and profit than any ever before. They knew how to execute the current business model.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

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

Both Sides of the Table

MAY 24, 2021

It has historically been the case that VCs would rather fund the promise of 100x in a company with almost no revenue than the reality of a company growing at 50% but doing $20+ million in sales. 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.

Venture Capital 363

Venture Capital LP Valuation Later Stage 363