View from Seed

JULY 15, 2020

Some early stage businesses may even be able to get to CFBE fairly quickly. 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. These tend to vacillate a lot early on, but converge as portfolios mature.

Portfolio 215

Portfolio IRR Dilution Distribution 215

Gust

AUGUST 16, 2012

On the other hand, the large majority of self-described “angel investors”, both domestically in the US and internationally, would not fall into this category.

Angel Investor 152

Angel Investor IRR Early Stage Portfolio 152

Up and Running

AUGUST 19, 2014

I like how the Angel Capital Association describes the difference between angels and venture capitalists: “Angels generally invest their own money in start-ups and very early stage companies, while VCs mostly provide capital they have raised from others to later-stage businesses for growth.”. 51 percent).

Angel Investor 161

Angel Investor Technical Review Due Diligence Startup 161

Startup Professionals Musings

AUGUST 2, 2014

Angels are more likely to fund new entrepreneurs, and early-stage or seed rounds, while VCs tend to focus on entrepreneurs with a successful track record, and later stage rounds. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return).

Angel Investor 266

Angel Investor Entrepreneur Venture Capital IRR 266

Seeing Both Sides

SEPTEMBER 26, 2010

A little IRR math shows the price of this elongated time to liquidity – a 5x return in 5 years yields a 38% IRR. To achieve that same 38% IRR in 9 years, a 20x return is required! If the founders take money off the table, they are incented to go for the bigger win and don’t mind taking the time to get there.

IRR 36

IRR IPO Entrepreneur LP 36

Steve Blank

JUNE 11, 2013

And at this early stage you’ll be giving up a larger percentage of your firm to investors. A seed round can come from friends, family, Kickstarter, angels – and most importantly, early customers. What is an IRR? Why small amounts? No startup ever spends less then it raises. How do the fund and the partners make money?

Venture Capital 333

Venture Capital IRR Liquidity Event Business Model 333

Hunter Walker

NOVEMBER 13, 2018

It’s essentially a private IPO where early investors, founders and employees get some liquidity and Softbank gets minority ownership, maybe a Board seat. Cool, cool. This* is a more complicated situation for seed investors. What do I think is happening in #2?

Cap Table 95

Cap Table IRR IPO Early Stage 95

Startup Professionals Musings

JUNE 5, 2016

Angels are more likely to fund new entrepreneurs, and early-stage or seed rounds, while VCs tend to focus on entrepreneurs with a successful track record, and later stage rounds. VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return).

Angel Investor 120

Angel Investor IRR Valuation Startup 120

David Teten

JANUARY 28, 2013

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.

IRR 114

IRR Angel Investor Angel Groups Cofounder 114

Hippoland

NOVEMBER 13, 2016

However, these other methods do not apply particularly well to early stage investing, in my opinion.) A common intermediary milestone for most investors is IRR (internal rate of return) of the fund. So there are a lot of unrealized gains built into the IRR of an early fund. Let’s take this one last step.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Both Sides of the Table

OCTOBER 17, 2019

An example was that while we were in the seed round at Ring and followed in the A, B, C and D … we were also able to lean into the E round when Jamie really wanted to scale up his funding and the final check was still > 420% IRR!

IP 223

IP Intellectual Property IRR Cofounder 223

SoCal CTO

MAY 19, 2010

I guess I’m wondering why early stage investment isn’t aiming at these kinds of investments? The largest number of exit transactions today are in the under $30-million valuation range. These exits are often completed when companies are only two or three years from startup.

Hockey Stick 205

Hockey Stick NPV IRR Valuation 205

Steve Blank

JUNE 11, 2013

And at this early stage you’ll be giving up a larger percentage of your firm to investors. A seed round can come from friends, family, Kickstarter, angels – and most importantly, early customers. What is an IRR? Why small amounts? No startup ever spends less then it raises. How do the fund and the partners make money?

Venture Capital 225

Venture Capital IRR Liquidity Event Business Model 225

David Teten

NOVEMBER 17, 2011

Enter Raul: This capital table startup options valuation model was created with the purpose of valuing options for an illiquid, early-stage start-up. The valuation method I discuss here is how people (other than friends, family and fools) really invest in early stage 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

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

K9 Ventures

DECEMBER 14, 2008

Unlike investing in public markets, investing in early stage companies happens before those companies have a real business, when it is just a concept and a team, and sometimes not even a whole team. What early-stage venture capital is betting on is people. Those returns do not (and cannot) scale with the size of the fund!

IRR 99

IRR Bandwidth Venture Capital Early Stage 99

Startup Professionals Musings

MAY 9, 2011

Luckily for me (and regardless of what anyone else says, there is a lot of luck involved in angel investing), I have since had significant positive exits to companies like Kodak, CBS and Facebook, and the current value of my portfolio is approaching the 30% IRR that rational angels target.

New York 221

New York Accredited Investor Advisory Board IRR 221

This is going to be BIG.

JULY 30, 2015

After factoring in price and mortality rate (risk), every stage's investor would be trying to get a return that satisfies their LPs--and I think that's the same across all early stages. Along the way, you've got some early, smaller exits as well. Time is the enemy of IRR. 25% of the A's sell for $20mm.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

Eric Friedman

MARCH 15, 2017

Back to coachability — I do not have it all figured out Since evolving my own thesis for early stage founders for 2017 you will have to look back on the Expa Labs companies started in 2016 to judge whether or not this system worked.

IRR 60

IRR Early Stage Leadership Programming 60

David Teten

AUGUST 21, 2019

2) To sell their businesses when they want – early, mid term, or never.” . When you raise early stage VC, you can’t sell early because the VCs won’t agree to it. 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

David Teten

JULY 10, 2017

Many large corporations face three seemingly disconnected challenges; they want: – Better returns on their balance sheet and underfunded pensions; – Access to the innovation economy to stay on top of the early-stage companies attacking their business; and.

Employee 60

Employee Balance Sheet Syndicate Syndication 60

This is going to be BIG.

DECEMBER 28, 2013

I''ve closed on about 20 early stage investments and, by comparison, 5 of my investments are now worth $40 million or more either via financing or exit (with three more over $25 million). My total valuation multiple across that span is nearly 4x and the return rate is up over 110% IRR. That''s 25%.

Venture Capital 152

Venture Capital Cofounder IRR Dilution 152

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 Software Review 28

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

MAY 14, 2011

In my view the terminology being used for early stage investors by the press and the media is not as clear as it should be. I’ve talked about this on several occasions when I’ve been at conference and on panels, but I figured it would make sense to do a post explaining my taxonomy of the early-stage investing world.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Both Sides of the Table

MAY 25, 2013

But the larger funds usually have lower returns because they are often investing bigger dollars at later stages with less risk and therefore lower returns. As you can see in this Cambridge Associates data, early-stage investing beat later stage investing in returns in 70% of the past 30 years.

LP 374

LP Later Stage IRR Term Sheet 374

Feld Thoughts

AUGUST 1, 2018

The $750 million fund combines all of our prior fund strategies – our early stage, early growth, and partner fund investments – into a single fund. For historical reference, our early-stage funds (FG 2007, FG 2010, FG 2013, and FG 2016) are all $225 million in size.

Syndicate 17

Syndicate Syndication IRR Canada 17

K9 Ventures

NOVEMBER 30, 2008

However, even though this is a young industry, I’m going to posit that “early-stage” venture capital as it exists today is broken and in need of reform. For what I’ve seen/heard the tops VC funds typically have an IRR of over 20%. I refer to this as the Venture Spiral. This poses it’s own problems.

IRR 48

IRR Venture Capital LP Early Stage 48

Both Sides of the Table

MAY 24, 2021

He then went on the create an early-stage VC that I track closely?—? 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. Entrada Ventures? —?that that plays a leading role in funding in the Central Coast of California.

Venture Capital 363

Venture Capital LP Valuation Later Stage 363

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). I take CFO roles in early stage companies and participate on the management team during the early financings and business model development phases.

Pre-Money Valuation 28

Pre-Money Valuation Angel Investor Angel Groups Valuation 28

abovethecrowd.com

APRIL 20, 2016

Never in the history of venture capital have early stage startups had access to so much capital. Do you feel the need to raise more capital quickly before the prices erode further and bring down your IRR? Competition also has access to capital. So, raise as much as you can as fast as you can, and be super-ambitious.

IPO 40

IPO Term Sheet Silicon Valley Valuation 40