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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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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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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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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7 Entrepreneur Questions To Select The Ideal 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. They argue that the color of the money is the same from either source.

How is the VC Asset Class Doing?

View from Seed

The longer the portfolio maintains the same value without distributing back cash, the worse the fund’s ultimate IRR. This equates to something in the neighborhood of a 10% IRR, which isn’t great given the illiquidity of the asset class and strength of the public markets.

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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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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.

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.

Why Companies are Not Startups

Steve Blank

They include: return on net assets ( RONA ), return on capital deployed, internal rate of return ( IRR ), net/gross margins, earnings per share, marginal cost/revenue, debt/equity, EBIDA , price earning ratio, operating income, net revenue per employee, working capital, debt to equity ratio, acid test, accounts receivable/payable turnover, asset utilization, loan loss reserves, minimum acceptable rate of return, etc. (A

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. If you're following on in the A round, then you shed a full 500 basis points on your IRR. Well, clearly the dollars are much better--which is nice for VCs who get a cut of the dollar profits (as opposed to being paid on IRR). Time is the enemy of IRR.

As a VC or angel investor, how has your approach to investing changed over time?

Gust

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.

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. Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”).

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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. In the past, such statements have been credibility red flags, since “everyone” knows that a dominant brand takes decades to establish and scale. Only recently, I realized that times are rapidly changing.

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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. Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”).

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. Entrepreneurs who require funding for their startup have long counted on self-accredited high net worth individuals (“angels”) to fill their needs, after friends and family, and before they qualify for institutional investments (“VCs”).

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. ———– One of my ex students came out to the ranch to give me an update on his startup. When I asked, “What are you working on?” the first words out of his mouth was his fund raising progress.

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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. They argue that the color of the money is the same from either source.

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). The typical “successful” venture portfolio is often described as having the following outcome: 1/3 of companies fail. 1/3 of companies return capital (or make a small amount of money). 1/3 of companies do well.

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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. They argue that the color of the money is the same from either source.

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). The typical “successful” venture portfolio is often described as having the following outcome: 1/3 of companies fail. 1/3 of companies return capital (or make a small amount of money). 1/3 of companies do well.

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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. ———– One of my ex students came out to the ranch to give me an update on his startup. When I asked, “What are you working on?” the first words out of his mouth was his fund raising progress.

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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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What Did I Learn From the First VC Check I Ever Wrote?

Both Sides of the Table

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! I became a VC 12 years ago in 2007 when the pace of deals was much slower. I had just left Salesforce.com where I was VP, Products, after they had acquired my second startup.

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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. I have to admit, I’ve seen some judges of graduate-level business plan competitions care about IRR, but never an actual angel investor during actual due diligence. Read more of my articles related to this topic: You Can Take That IRR and Shove It.

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. But I have found that making the right choice at the right time can have a major impact on your long-term valuation, and the decision process is complex. The basics are simple.

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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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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. This applies to all classes of fund managers, including pension fund managers, IFAs, private equity fund managers, and venture capital fund managers.

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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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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 the most counter-intuitive fund-raising advice you’ll ever get I’m about to offer you some fund-raising advice that flies directly in the face of what most conventional wisdom will tell you.

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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10 Things I Hated About Your Business Pitch

Up and Running

But don’t quote me a damned IRR. As I write this in early 2019, I’m thinking back on more than 20 years of hearing business pitches as a judge of business plan competitions and as an angel investor. Next month I’ll have another round of it, judging both the University of Oregon New Venture Competition and the Rice Business Plan Competition. Once again I’ll be reading business plans first, then sitting for the pitch and asking my questions. .

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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Why Wall Street Can’t Be Trusted and What to Do About It

Growthink Blog

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. We then reviewed the various approaches to gain exposure to this return potential: Investing directly in operating companies, doing so through a Venture Capital Fund , or “Doing as Warren Does" and utilizing “ The Berkshire Approach ” of investing in an operating company that in turn invests in other operating companies.

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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. Sometimes the end game or sale of the company is not a happy event for the early investors, including the entrepreneur or the founders.

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. President Bieto, Dean Sauquet, members of the faculty, distinguished guests, and ladies and gentlemen….Thank Thank you for the kind introduction.

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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. *. One last point: the 27% IRR calculation I referenced above is from the Kauffman Foundation for angel investors in groups.

Coachability

Eric Friedman

One interesting point someone brought up to me is that while true performance can be measured against the IRR of the capital we deploy, there are more nuanced paths to success that a place like Expa offers such as career paths for people, Expa Studio companies that can yield interesting opportunities for founders and of course the experience itself which can help people.

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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.

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. This is the third of three blog posts on financial modeling for startups.

Paul Graham and The World Out There

This is going to be BIG.

My total valuation multiple across that span is nearly 4x and the return rate is up over 110% IRR. There is a controversial interview with Paul Graham floating around and I''m left to wonder why we''re still paying attention to guys like him. He is accused by people of being, at best, oblivious and at worst, sexist. I''ve never sat down with the guy, so I can''t speak to that, but I''m tired of hearing about the same voices over and over again when I''m not even sure they''re relevant.

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