View from Seed

AUGUST 17, 2021

A few weeks ago, we hosted a small dinner for a number of portfolio company founders, LP’s, and friends of the firm. One industry specific example is the strange fascination among some LPs and GPs around term IRR. This is the implied rate of return of a fund based on the value (mostly unrealized) of a portfolio.

IRR 156

IRR Dilution Founder Portfolio 156

View from Seed

AUGUST 17, 2021

A few weeks ago, we hosted a small dinner for a number of portfolio company founders, LP’s, and friends of the firm. One industry specific example is the strange fascination among some LPs and GPs around term IRR. This is the implied rate of return of a fund based on the value (mostly unrealized) of a portfolio.

IRR 136

IRR Dilution Founder Portfolio 136

Startup Professionals Musings

DECEMBER 16, 2017

This is called the “portfolio approach,” which counts on hitting only a couple of big winners, while the others return very little. There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years. What ends up, usually went down first.

Angel Investor 190

Angel Investor Accredited Investor IRR Angel Groups 190

Startup Professionals Musings

MAY 9, 2014

This is called the “portfolio approach,” which counts on hitting only a couple of big winners, while the others return very little. There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years. What ends up, usually went down first.

Angel Investor 278

Angel Investor Angel Groups Accredited Investor IRR 278

Startup Professionals Musings

JUNE 5, 2015

This is called the “portfolio approach,” which counts on hitting only a couple of big winners, while the others return very little. There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years. What ends up, usually went down first.

Angel Investor 120

Angel Investor Angel Groups Accredited Investor IRR 120

Gust

NOVEMBER 1, 2011

Based on the Wiltbank Study, investors should expect a 27% IRR in six years. Most angels understand that half of new ventures fail and the best an investor can expect from nine of ten investments is return of capital for a portfolio of ten. Anticipated ROI: Angel investing is risky business.

Venture Capital 161

Venture Capital Valuation Pre-Money Valuation Post-Money Valuation 161

Steve Blank

MARCH 31, 2014

Unfortunately as we’ve learned from recent experience, using Return on Net Assets and IRR as proxies for efficiency and execution won’t save a company when their industry encounters creative disruption. Third, smart companies manage an innovation portfolio where they can pursue potential disruption in a variety of ways.

Private Equity 325

Private Equity Metrics China Intellectual Property 325

David Teten

JANUARY 19, 2021

Seed-stage compatible: Like traditional equity VC investors, Flexible VCs accomodate early-stage investment risk within their portfolios better than a traditional RBI funder. This causes the cost of capital for Flexible VC, often calculated through IRR (similar to an interest rate), can be higher than that of venture debt or traditional RBI.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

David Teten

SEPTEMBER 16, 2014

To succeed in the space, angels must have a high risk tolerance, a large bank account to weather losses, and most important, a diverse enough portfolio to handle losing money on most of your investments. Of course, investing in a diversified portfolio is a significant time commitment. Average Angel Returns Over Time. Time Period.

Angel Investor 114

Angel Investor Technical Review Venture Capital Pre-Money Valuation 114

Gust

AUGUST 16, 2012

That is because they are either new to the field, not taking it seriously as a financial business, not in it for the long haul, or not willing to continue investing until they have a fully diversified investment portfolio. For those people, returns tend to be flat to mostly negative. original post can be found on Quora @ : [link] *.

Angel Investor 152

Angel Investor IRR Early Stage Portfolio 152

Hippoland

NOVEMBER 13, 2016

So while I’m waiting for my portfolio companies to either die or go IPO, what am I looking at as indicators of success / failure? Now let’s say we have two portfolios of companies. Portfolio 1: 3 companies Last valuation for all: $3m cap convertible note Recent raise: $1m for each company. Equity rounds of $10m pre.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Gust

APRIL 30, 2014

Having now invested in over 85 startups, and finding that my personal metrics are very similar to aggregated industry ones, it is clear that (a) there is little to no correlation between my home runs and my personal favorites, and (b) angel investing done correctly really *can* produce a consistent IRR in the 25%-30% range.

Angel Investor 148

Angel Investor IRR Due Diligence Aggregator 148

VC Adventure

AUGUST 12, 2014

The typical “successful” venture portfolio is often described as having the following outcome: 1/3 of companies fail. This really underscores the challenge of creating a venture portfolio that produces reasonable returns. 1/3 of companies return capital (or make a small amount of money). 1/3 of companies do well.

IRR 133

IRR Portfolio Distribution Venture Capital 133

VC Adventure

AUGUST 12, 2014

The typical “successful” venture portfolio is often described as having the following outcome: 1/3 of companies fail. This really underscores the challenge of creating a venture portfolio that produces reasonable returns. 1/3 of companies return capital (or make a small amount of money). 1/3 of companies do well.

IRR 122

IRR Portfolio Distribution Finance 122

David Teten

APRIL 8, 2013

My coauthors and I just published in the Journal of Private Equity the first-ever research study on best practices of venture capitalists in creating portfolio company value through operational support, exploring exactly these questions. Analytics and Data Contributed Articles Portfolio Operations Private Equity Venture Capital'

Private Equity 114

Private Equity Hungary IRR Venture Capital 114

The Equity Kicker

MAY 27, 2015

Rather than look at our expenses as a percentage of assets under management, which is high compared with our peers, the right question to ask is whether our investment in supporting our portfolio is working. We invest more in support to drive higher returns. Does it enable us to do better deals?,

Cost 60

Cost IRR Private Equity Salary 60

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

David Teten

NOVEMBER 17, 2011

By definition, IRR is calculated using amount invested, amount received at some point in the future, and time passed between the two cash flows. According to the Kauffman study “ Returns of Angel Investors in Groups ”, the mean IRR of angel investments hovered around 27% as of November 2007.

Employee 155

Employee IRR Startup Mexico 155

Growthink Blog

JUNE 3, 2014

Over the last three weeks, we have discussed the various factors that drive the 25% IRR return potential of the startup and emerging company investing class. To not be swayed nor frightened by the financial industry’s omnipresent marketing machine. And when we do, a world of opportunities open up that are anything but institutional.

Omaha 91

Omaha Accredited Investor IRR Silicon Valley 91

This is going to be BIG.

JULY 30, 2015

And those exits would be roughly 10% of the portfolio--about 3 out of every 30ish deals. So here's what the charts say for follow on strategies: If you run down the first column, what it says is that it basically doesn't matter if you follow on from an IRR perspective--a percent won't kill you here or there. Time is the enemy of IRR.

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? Labor Arbitrage.

San Diego 72

San Diego Warrant IRR Investment Bankers 72

ithacaVC

FEBRUARY 13, 2013

God said I need somebody to sit and patiently listen to thousands of pitches, even get up before dawn and have conference calls and sit in board meetings all day, make sure those portfolio CEOs are doing fine, eat sushi while driving a Prius. So, God made a VC! and then finish a hard days work with a five mile drive to the home-by-the-sea.

Liquidation Preference 55

Liquidation Preference IRR Due Diligence LP 55

K9 Ventures

DECEMBER 14, 2008

When it comes to helping portfolio companies grow, it is the people relationships that matter most — can you open doors to prospective customers, employees, partners, lawyers, accountants, bankers and of course other investors. Lets assume that Shylock Ventures is capable of producing a 20% IRR on a $100M fund.

IRR 99

IRR Bandwidth Venture Capital Early Stage 99

This is going to be BIG.

DECEMBER 28, 2013

You could argue that the recent companies are too early, so I''ll take that challenge and compare it with my own portfolio. My total valuation multiple across that span is nearly 4x and the return rate is up over 110% IRR. The classes got too big and quality was diluted because, by PG''s own admission, YC " grew too fast.".

Venture Capital 152

Venture Capital Cofounder IRR Dilution 152

David Teten

AUGUST 21, 2019

The RBI investor is motivated to help the company grow because that speeds up the pace of revenue payback, and therefore IRR. Keith Harrington, Co-Founder & Managing Director at Novel Growth Partners, reports that his portfolio companies are reporting their obligations as debt. Aligned incentives. But this isn’t really a problem.

Revenue 60

Revenue Liquidation Preference Equity Cofounder 60

Both Sides of the Table

MAY 24, 2021

Since funds were driven by extreme successes in their portfolios where just one deal could return 5x the entire fund while 95% of the fund may have done well but not amazing, not missing out on deals was critical. The Valley has obsessed with a quick up-and-to-right momentum story because we were thought to live in “winner take most” markets.

Venture Capital 363

Venture Capital LP Valuation Later Stage 363

K9 Ventures

MAY 14, 2011

He or she doesn’t have a “day-job” but spends all of his or her time in evaluating new investment opportunities or working with portfolio companies. As fiduciaries, the general partners of the uVC funds have to begin to focus on the dreaded VC I-word : IRR. This also changes the types of deal terms that micro-VCs will undertake.

Preferred Stock 125

Preferred Stock Seed Stage Incubator Early Stage 125

Up and Running

AUGUST 19, 2014

Always look at the portfolio of investments the firm has made, and contact the CEOs and founders of those companies to find out what it’s like having those investors as a part of their company. Forget the stupid IRR (that’s internal rate of return) that they taught you in business school.

Angel Investor 161

Angel Investor Technical Review Due Diligence Startup 161

Agile VC

NOVEMBER 13, 2012

At Risk – Usually starts with a firm beginning to see challenges in large portions of its portfolio, or in keeping the partnership together, or in the viability of the firm’s core strategy as broader markets start to shift (e.g. typically, which in most cases would to >20% IRR. So at a fund level (e.g.

LP 154

LP Portfolio Venture Capital IRR 154

Hunter Walker

FEBRUARY 25, 2018

One consistent LP complaint I hear about new’ish fund managers is that they forget a bunch of fund construction and portfolio modeling decisions are connected. When a VC is fundraising one of the stats they like to present to LPs is the quality and size of follow-on in the portfolio. a fellow VC asked me after my previous post.

Product 82

Product IRR LP Seed Stage 82

David Teten

OCTOBER 15, 2013

ff Venture Capital has consistently generated a gross IRR on invested capital in excess of 30%, in a world where the average ten-year returns for venture capital firms are in the single digits. Indiegogo is a ffVC portfolio company. But, ridiculously, historically we couldn’t say that it in a public setting. Now we can.

Venture Capital 114

Venture Capital Accredited Investor IRR Later Stage 114

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

Venture Chronicles

JUNE 30, 2010

Over the past 10 years their quarterly internal rate of return (IRR)—the primary measure of VC success—was dismal, hovering in the single percentage points and sometimes dipping into negative territory. Their main sources of profitability—IPOs of their portfolio firms—are fewer and farther between. Tags: Uncategorized VC IRR.

IRR 36

IRR IPO Venture Capital Portfolio 36

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). Asset approach.

Valuation 128

Valuation NPV Net Present Value IRR 128

K9 Ventures

NOVEMBER 30, 2008

Doing 10 investments at $1M each would mean that the partner would now have a gigantic portfolio to manage and there just isn’t enough time in the day, or week, or year to manage that many investments, serve on boards and help companies grow while still continuing to look for new investments. The money side is flexible.

IRR 48

IRR Venture Capital LP Early Stage 48

abovethecrowd.com

APRIL 20, 2016

Gavin Baker, a high-profile portfolio manager at Fidelity has a message for Unicorn CEOs: “Generate $1 of free cash flow, and then you can invest everything else in growth and stay at $1 in free cash flow for years. 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

Hippoland

NOVEMBER 6, 2016

I was comparing my small personal angel portfolio and my investments at 500 Startups, and I noticed that on a percentage basis, the companies in my personal portfolio have been able to raise more money on average and more easily than companies in my 500 portfolio. Why is that? And, all of those founders have pedigree.

Portfolio 48

Portfolio IRR Later Stage Limited Partner 48