Startup Professionals Musings

JUNE 5, 2015

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”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 120

Angel Investor Angel Groups Accredited Investor IRR 120

View from Seed

AUGUST 17, 2021

One industry specific example is the strange fascination among some LPs and GPs around term IRR. Even though everyone knows that VC funds take 10+ years to come to fruition, one often can’t help but benchmark themselves based on IRR in the early days. But I think the generic advice that competition doesn’t matter isn’t true.

IRR 136

IRR Dilution Founder Portfolio 136

Startup Professionals Musings

MAY 9, 2014

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”). Thus investing in startups should always be approached as a low odds game.

Angel Investor 278

Angel Investor Angel Groups Accredited Investor IRR 278

Steve Blank

MARCH 4, 2014

In the last few years we’ve recognized that a startup is not a smaller version of a large company. We’re now learning that companies are not larger versions of startups. But paradoxically, in spite of all their seemingly endless resources, innovation inside of an existing company is much harder than inside a startup.

IRR 335

IRR Startup Business Model Agile 335

Gust

NOVEMBER 1, 2011

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. It is one of the useful methods for establishing the pre-money valuation of pre-revenue startup ventures. OK…let’s split the difference.

Venture Capital 161

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

Steve Blank

MARCH 31, 2014

Just look at the disruptive challenges that businesses face today– globalization, China as a manufacturer, China as a consumer, the Internet, and a steady stream of new startups. Perhaps that’s because where established companies might see risks or threats, startups see opportunity. Building Innovation Internally is Hard.

Private Equity 325

Private Equity Metrics China Intellectual Property 325

David Teten

JANUARY 19, 2021

More and more startups are pursuing Revenue-Based VCs , but “RBI” doesn’t fit everyone. 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. 20-30% is a common target IRR for investors. of startups raise VC.

Cofounder 78

Cofounder Technical Review Equity Dividend 78

Startup Professionals Musings

FEBRUARY 5, 2018

Of course, in a world which spawns over a half million startups every month, these accomplishments are very rare, but they are happening like never before. Whether our business is a startup or a multi-national brand, through platforms like Amazon, giant players have no special advantage.

IRR 143

IRR Marketing Startup Angel Investor 143

David Teten

MAY 16, 2017

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%.” Katherine Barr: 5 00 Startups’ Premoney. Chris Douvos is one of the very few LPs who blogs, at SuperLP.com. ” .

Private Equity 60

Private Equity Venture Capital Technical Review Equity 60

Austin Startup

AUGUST 31, 2016

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

IRR 48

IRR Austin Business Model Startup 48

Tim Keane

OCTOBER 19, 2016

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.

IRR 60

IRR Networking Startup 60

Startup Professionals Musings

APRIL 3, 2012

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). Type of startup. Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). The money is the same color in either case. The basics are simple. Expected return rate.

IRR 248

IRR Term Sheet Startup Valuation 248

Tim Keane

JANUARY 12, 2010

Startups and angels: Along the way to success. 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%   (If you plug in an IRR of 58.5%

Term Sheet 68

Term Sheet Valuation Dividend Liquidation Preference 68

VC Adventure

OCTOBER 5, 2020

Ian Hathaway, who recently co-authored the second edition of Startup Communities with my partner, Brad, sent me the chart below which highlights how that translates to returns in venture capital as an asset class. Taking the most aggressive end of these numbers would still only have this one company returning 70% of the fund’s capital.

IRR 174

IRR Venture Capital Community Partner 174

David Teten

SEPTEMBER 16, 2014

These companies can range from tech startups to food trucks to retail stores. Sohl: “The Angel Investor Market in 2009: Holding Steady but Changes in Seed and Startup Investments”. Villalobos & Payne: “Startup Pre-Money Valuation: The Keystone to Return on Investment” 117. More than 90% of startups fail.[2]

Angel Investor 114

Angel Investor Technical Review Venture Capital Pre-Money Valuation 114

Startup Professionals Musings

NOVEMBER 11, 2010

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). Type of startup. Another rule of thumb is a target of 50% IRR (a discounted cashflow calculation). Tags: entrepreneur startup investor angel VC business. The basics are simple.

IRR 225

IRR Startup Term Sheet Angel Investor 225

David Teten

NOVEMBER 17, 2011

This is the third of three blog posts on financial modeling for startups. The first was on best practices in building financial models , and the second was a template financial model for a startup. Download the Startup Options Valuation model here. Valuing startups is a far fuzzier process. Participa.me

Employee 155

Employee IRR Startup Mexico 155

View from Seed

JULY 15, 2020

This may not hurt the ultimate exit value of these companies, but the passage of time will hurt the fund’s ultimate IRR. VC’s may have been expecting significant liquidity from some companies in 2020 and early 2021, but will need to put that off for some time even if the companies are doing ok. Reshuffling the deck.

Portfolio 215

Portfolio IRR Dilution Distribution 215

Hunter Walker

JULY 18, 2021

Before we founded Homebrew I made ~20 or so investments in startups using my own savings. I never really tracked IRR or net returns, but I did pay close attention to ‘lessons learned.’ I Made These Mistakes A Few Times But You Don’t Need To. Part of successful angel investing is picking winners.

Cap Table 140

Cap Table IRR Angel Investor IPO 140

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

Steve Blank

JUNE 23, 2016

Disruptive innovations are coming from startups – Telsa for automobiles, Uber for taxis, Airbnb for hotel rentals, Netflix for video rentals and Facebook for media. 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.

Architecture 227

Architecture IRR Balance Sheet Liquidity Event 227

David Teten

APRIL 8, 2013

Based on a range of sources, we believe that most funds with well-developed Portfolio Operator models have top-quartile returns (typically above 20% IRR in the relevant time periods). What are some other ways that VCs can help their startups? VC at around $20b a year.

Private Equity 114

Private Equity Hungary IRR Venture Capital 114

Feld Thoughts

JULY 31, 2013

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. Our equity IRR has averaged around 50% since inception. Boulder boulder startup community dan caruso startups zayo'

Bandwidth 147

Bandwidth Colorado Startup IRR 147

Hippoland

NOVEMBER 13, 2016

It takes a long time to see the results of a startup that does well. 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. Company progress on KPIs, including revenue, typically do not get factored into IRR.

IRR 48

IRR Valuation Portfolio Due Diligence 48

Both Sides of the Table

OCTOBER 17, 2019

I had just left Salesforce.com where I was VP, Products, after they had acquired my second startup. Bank as well as many startups like Gusto and MakeSpace and innumerable massive clients that weren’t on my approved list of clients I could disclose ;) but we partner with Google, Adobe, Salesforce and many others.

IP 223

IP Intellectual Property IRR Cofounder 223

Feld Thoughts

APRIL 21, 2016

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. If you are a founder, an employee in a startup, or an investor in a startup, you have to be playing a long term game. Long term is not a year.

Marketing 70

Marketing Down Round Startup IRR 70

Hunter Walker

NOVEMBER 13, 2018

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. And I worry about the impact of too much capital on a youngish startup.

Cap Table 95

Cap Table IRR IPO Early Stage 95

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

Both Sides of the Table

MAY 19, 2018

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. I never thought of this until I became the Founder & CEO of my first startup company.

Cap Table 336

Cap Table Due Diligence Forecast Churn Rate 336

SoCal CTO

MAY 19, 2010

I’m planning on going to a Tech Coast Angels mixer tomorrow and the topic for me is whether there is angel funding out there for startups that don’t meet classic VC models. These exits are often completed when companies are only two or three years from startup. Or maybe they are and I’m missing it because I’m going to TCA events?

Hockey Stick 205

Hockey Stick NPV IRR Valuation 205

The Equity Kicker

OCTOBER 25, 2012

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). So think of the following as the profile of a successful fund rather than an average fund.

LP 150

LP IRR Venture Capital Naming 150

This is going to be BIG.

JULY 30, 2015

You don't want the "average" fund, because average funds don't do well--just like you don't want to model the average startup, because you might as well draw a big flaming hole in the ground. If you're following on in the A round, then you shed a full 500 basis points on your IRR. Time is the enemy of IRR. No surprises there.

Venture Capital 60

Venture Capital Pre-Money Valuation IRR Valuation 60

Steve Blank

AUGUST 5, 2014

When I was where you are, 36 years ago (can ya believe it) I didn’t have a plan—but I did have an aspiration: I wanted to go to Silicon Valley and I wanted to work in startups. Eventually I left Oracle, wanting to do another startup. Problem is, startups that have world changing potential are not that easy to find.

Venture Capital 333

Venture Capital Silicon Valley Chicago Cofounder 333

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.

Omaha 91

Omaha Accredited Investor IRR Silicon Valley 91

Startup Professionals Musings

MARCH 12, 2023

They fail to realize that the considerations are quite different for each, which can make or break their investment efforts, and ultimately their startup. More importantly, the focus on numbers tends to hide other more subjective issues that could be more important for any given startup. How big is your startup opportunity?

Angel Investor 246

Angel Investor IRR Venture Capital Valuation 246

David Teten

JULY 10, 2017

Angel investing is an exceptionally high-return asset class; I have collected twelve studies on angel returns in the US and UK, which show median internal rate of return (IRR) between 18 and 38 percent. This helps execute against the three goals above: – Provides a chance at high returns.

Employee 60

Employee Balance Sheet Syndicate Syndication 60

Up and Running

DECEMBER 22, 2015

We don’t just reject startups; we explain why. Angel investors are individuals willing to invest their own money to fund new startups. Most of them have made money with startups; they’ve been through the ringer, they’ve succeeded, and they are in a position to share. So if you’re a startup, always focus on listening first.

Angel Investor 60

Angel Investor IRR Software Review Startup 60