Golden Angels Announces IRR Results

Tim Keane

It’s not very often that angel networks disclose results. Most of us are ready and willing to discuss our approaches, beliefs or methods, but usually stop well short of providing the proof of our assertions. Today, Golden Angels is publishing. Funding startups

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The IRR of Simplicity

Austin Startup

September 5, 2016: Some recent successful exits in Austin have caught my eye for the relative simplicity of their business models. Patient… Continue reading on Austin Startups

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Investors: Don’t believe your ROI projections

Up and Running

And Internal Rate of Return (IRR)? Finance angel investment IRR ROI venture capital Flash: investors don’t believe your ROI projections. News at 11. Why is this news? It shouldn’t be. But recently I joined two other angel investor members of our local group in a conference call giving companies feedback on why they didn’t make the final rounds in our annual event.

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Israeli VC Funds Struggled to Raise in 2009

VC Cafe

The Carmel I Fund, raised in 2000, had the highest performance, giving an internal rate of return (IRR) of 8% and a positive multiple of 1.4. Other funds, including Apax Israel II, Israel Seed IV and JVP showed negative IRRs of 20-30%.

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The VC Shakeout

Venture Chronicles

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. Tags: Uncategorized VC IRR This piece in HBR is must read, it details why there will be a lot fewer VC funds in the future. The sky is falling on the venture capital rainmakers.

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As a Seed Investor, Do I Want Softbank to Invest In My Best Companies Or Not?

Hunter Walker

You’re basically along for the ride with an investor who has very different incentives than you do – a different time frame, the AUM business vs IRR business, and requiring a scale in outcome that’s just astronomical.

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Do most angel investors make money?

Gust

The reality is that results in angel investing tend to bifurcate: “Professional” angel investors, who are investing calmly, steadily, relatively-rationally, over a long period of time and with a strong knowledge of both investment math and early stage realities, tend to not only make money, but do quite well: the average return for a comprehensive, well-managed angel portfolio is between 25% and 30% IRR.

How do VCs measure their success (and why you should care)?

Hippoland

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. Furthermore, we’ve established that companies don’t get credit for revenue — this does not get factored into IRR calculations. IRR calculations are based on two things — changes in a company’s value and the time-scale on which this happens.

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6 Reasons Startups Need All Angels Plus Crowd Funding

Startup Professionals Musings

There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years.

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5 Ways Today’s Market Allows Startups To Scale Faster

Startup Professionals Musings

Investors measure their success by looking at the internal rate of return (IRR). As an active angel investor, I’m accustomed to hearing entrepreneurs pitch their expectation to quickly create a new dominant brand, based on their disruptive technology.

Why Companies are Not Startups

Steve Blank

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.

Angel Investors Are Still The Lifeblood Of Startups

Startup Professionals Musings

There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years.

Fund Raising is a Means Not an End

Steve Blank

What is an IRR? Not all that glitters is gold. William Shakespeare. For many entrepreneurs “raising money” has replaced “building a sustainable business” as their goal. That’s a big mistake. When you take money from investors their business model becomes yours.

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How Smart Entrepreneurs Select VC / Angel Investors

Startup Professionals Musings

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited Angel investors.

Crowd Funding Has Not Killed Angel Investing Yet

Startup Professionals Musings

There is a rarified brand of successful investors who can show average IRRs of 25 percent or greater over the years.

Intel Disrupted: Why large companies find it difficult to innovate, and what they can do about it

Steve Blank

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. In the 21 st century it’s harder for large corporations to create disruptive breakthroughs.

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7 Criteria To Help Startups Find The Right Investor

Startup Professionals Musings

VCs will be looking for a 10X return on their investment in 3 to 5 years, or 30% annual IRR (Internal Rate of Return). Too many entrepreneurs tell me they are looking for an investor, and can’t differentiate between venture capital (VC) investors versus accredited Angel investors.

Venture Outcomes are Even More Skewed Than You Think

VC Adventure

The resulting fund would have an IRR in the range of 10% (the exact IRR would depend on the timing of the cash flows, but I constructed a few models to approximate this and 10% was the average return).

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What to Expect When You're Expecting Venture Capital Returns

This is going to be BIG.

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.

Cost ratios as a measure of fund efficiency

The Equity Kicker

The definitive answer to these questions will come over time as our portfolio matures, our companies exit, and we can demonstrate a high cash to cash IRR. Fund managers are assessed, in part, on their ratio of expenses to assets under management.

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The Trouble with Venture Capital Data

This is going to be BIG.

Sounds like a huge amount, but only later does he say that only " 476 funds which had known Net IRR values, the overwhelming majority of which were from vintage 2002, or more recently." 3) You can't eat IRRs for breakfast. You know what the IRRs of Quirky and Fab were before they went to zero? Looking at interim IRRs of young funds, especially during boom periods in venture isn't predictive of outcomes.

Venture Outcomes are Even More Skewed Than You Think

VC Adventure

The resulting fund would have an IRR in the range of 10% (the exact IRR would depend on the timing of the cash flows, but I constructed a few models to approximate this and 10% was the average return).

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5 Things Startups Can Learn from Angel Investors

Up and Running

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.

Fund Raising is a Means Not an End

Steve Blank

What is an IRR? Not all that glitters is gold. William Shakespeare. For many entrepreneurs “raising money” has replaced “building a sustainable business” as their goal. That’s a big mistake. When you take money from investors their business model becomes yours.

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Why you should never have a data room — the most counter-intuitive fund-raising advice you’ll ever…

Both Sides of the Table

Or if you’re a VC raising from LPs you have to list all of your deals, your investment value, your carrying value, your multiples, your IRRs, TVPIs, DPIs, etc along with net cashflows plus your previous LPAs. Why you should never have a data room?—?the

7 Key Drivers to the Best Investor For Your Startup

Startup Professionals Musings

Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). If your startup desperately needs an investor, you may not care if the investor is a so-called “angel” investor, or a venture capitalist (VC). The money is the same color in either case.

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Return profile of VC investments shows why home runs are key

The Equity Kicker

This LP is one of the more successful ones, they have positions in many of the top funds and have achieved a very comendable IRR from their investments in venture funds (well north of 20%, which is great as an average). One of the world’s larger investors in venture capital recently shared data with us about the multiples they have made on over 5,000 companies they had stakes in via their LP investments in US VC funds.

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Venture Funds as Products. What We Changed for Homebrew III.

Hunter Walker

Our J Curve and early IRR may look worse than other funds. “What did you change about Homebrew III to better fit ‘seed phases’ versus seed rounds ?” a fellow VC asked me after my previous post. That’s a great question!

Angel Investment Criteria

SoCal CTO

The example he uses is: THE RAISE Investment $500,000 Pre Money $600,000 Post Money $1,100,000 OWNERSHIP Founders 55% Investors 45% EXIT Sale Price $5,000,000 Time 5 years INVESTOR RATIOS ROI 355% Multiple 4.55x IRR 35% NPV @ 10% $828,000 Admittedly that valuation and the resulting ownership causes me to wonder, but the most interesting aspect is that Bob is talking about investing in a much smaller exit, with no future investment planned.

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Valuations 101: The Venture Capital Method

Gust

Based on the Wiltbank Study, investors should expect a 27% IRR in six years. We recently started a series of posts on establishing the pre-money valuation of pre-revenue startup companies for purposes of investment by seed and startup investors. The Venture Capital Method (VC Method) was first described by Professor Bill Sahlman at Harvard Business School in 1987 in a case study and has been revised since.

Current Startup Market Emotional Biases

Feld Thoughts

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. Bill Gurley wrote an incredible post yesterday titled On the Road to Recap: Why the unicorn financing market just became dangerous … for all involved. It’s long but worth reading every word slowly.

A Closer Look At The Quality Of Angel Returns Data

David Teten

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. I previously published this at Techcrunch. .

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Zayo Group – One of Boulder’s Amazing Startup Stories

Feld Thoughts

Our equity IRR has averaged around 50% since inception. I’m intensely proud of both the amazing startup community in Boulder as well as the many significant companies that have been – and are being – created in the little town of 100,000 people I call home. I regularly talk about the ones we’ve invested in through Foundry Group, but this only covers a part of the awesomeness that is going on here as Foundry Group has a very tight thematic focus.

ESADE Business School Commencement Speech

Steve Blank

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.

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Coachability

Eric Friedman

Let’s get the fun part out of the way: the word coachability auto corrects to “coach ability” or “coach-ability” but I like it combined so I am running with it.

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Angels and VCs: Don’t be greedy even if you can.

Berkonomics

You will not be moving your IRR needle enough by grabbing a few extra dollars in a marginal sale, but you will incur the wrath of a number of stakeholders who would be more than willing to spread the word far and wide about your greedy ways.

Pick the Right Investor Type for Your Startup

Startup Professionals Musings

Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). If your startup desperately needs an investor, you may not care if the investor is a so-called “angel” investor, or a venture capitalist (VC). The money is the same color in either case.

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More Cash for Entrepreneurs, Crowdfunding, and Indiegogo

David Teten

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 Venture Boutique

K9 Ventures

Lets assume that Shylock Ventures is capable of producing a 20% IRR on a $100M fund. If Shylock Ventures were now to raise a $500M fund or a $1B fund, it probably will not be able to maintain its IRR. In my previous post , I claimed that “Venture Capital is a people business in every sense of the word. It is therefore a boutique industry and it cannot scale.” ” Let me expand on that thought a little more to qualify what I’m saying.

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Valuing Startup Employee Options

David Teten

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.

Our New Fund – Foundry Group Next 2018

Feld Thoughts

We are very long-term investors, focusing on net cash on cash returns, rather than short-term or intermediate IRRs. This post originally appeared as Announcing Foundry Group Next 2018 on the Foundry Group website. We are happy to announce the closing of our seventh fund, Foundry Group Next 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.

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Pioneering Women in Venture Capital: Kathryn Gould

Steve Blank

I was on the way to my lifetime IRR of 90%. I met Kathryn Gould longer ago than either of us want to admit.

Fundraising Hacks for Venture Capital and Private Equity Funds

David Teten

As an idea of how high the bar is for a GP, he says , “I dove into our fund log from the last couple of quarters and found that the mean IRR (among VCs listing one) was over 36%.” Historically, the process of winning capital from limited partners has been opaque. However, in the last few years a few have started to use social media and become more transparent. I particularly like OpenLP.com, SuperLP.com, and the Origins podcast.