IRR tells you what your average return is when time value of money is factored in.
Let's say you have an option to get 100K today or 100K in 5 years.
You would obviously prefer to get paid today so you can reinvest.
Investing can be complicated.
Let's make it simple.
10 terms every entrepreneur and investor should know:
IRR tells you what your average return is when time value of money is factored in.
Let's say you have an option to get 100K today or 100K in 5 years.
You would obviously prefer to get paid today so you can reinvest.
An investment that realises returns sooner than later will have a higher IRR.
Also known as cash-on-cash return or multiple of invested capital (MOIC).
Example:
Total cash inflows (proceeds from sale of a company) = $100M
Total cash outflows (initial investment) = $10M
MoM would be 10.0x.
A “back-of-the-envelope” method to calculate how long it would take your investment to double (2x).
Example:
How long would it take to double my money if I invest in the S&P 500?
S&P 500 average return = 8%
= 72 / 8
= 9 years
Tells you how many years for your investment to triple (3x).
Lesser known than the rule of 72, still powerful.
Same example:
How long would it take to triple my money if I invest in the S&P 500?
S&P 500 average return = 8%
= 115 / 8
= 14.4 years
TVPI answers, “How does the total realised and unrealised profits compare to the initial paid-in capital”
Cumulative distributions = Realised profits
Residual value = Unrealised potential profits
Paid-in capital = Investor's commitment
DPI measures the amount of money returned by a fund to its investors relative to their paid-in capital.
Cumulative distributions = Realised profits
Paid-in capital = Investor's committed capital
Dry powder is capital committed to private investment firms that still remains unallocated.
It's money that's sitting on the side, yet to be invested.
Post-Money Valuation = The value of a company’s equity once the round of financing has occurred.
This includes the latest capital injection.
Post-money valuation = pre-money valuation + financing raised
Pre-Money Valuation = The value of a company’s equity before raising a round of financing.
This is the value of a company excluding the latest round of funding.
Pre-money valuation = post-money - financing raised
An "up round" means the valuation of the company raising capital has increased in comparison to the prior valuation received.
A "down round" means the company’s valuation has decreased post-financing in comparison to the preceding round of financing.
1/ Internal Rate of Return (IRR)
2/ Multiple of Money (MoM)
3/ Rule of 72
4/ Rule of 115
5/ Total Value to Paid-In Capital (TVPI)
6/ Distribution to Paid-In Capital (DPI)
7/ Dry Powder
8/ Post-Money Valuation
9/ Pre-Money Valuation
10/ Up Round vs Down Round
If you liked this thread, you'll love the newsletter.
Subscribe here:
https://t.co/rX04WMkBwf
https://t.co/uh8YW1cvgc
The most important trait of an entrepreneur is someone who can tell a story.
— Alex Banks (@thealexbanks) August 1, 2022
10 storytelling principles to get their attention, raise money and win deals:
https://t.co/glkbGd2Dxu
Investing can be complicated.
— Alex Banks (@thealexbanks) August 3, 2022
Let's make it simple.
10 terms every entrepreneur and investor should know:
More from Alex Banks
10 threads that will teach you more about business than any business degree:
1/ Who: @naval
What: Principles to wealth creation
Tweet:
2/ Who: @sweatystartup
What: Actions to wealth creation
Tweet:
3/ Who: @RomeenSheth
What: Early career
4/ Who: @heykahn
What: Career
1/ Who: @naval
What: Principles to wealth creation
Tweet:
How to Get Rich (without getting lucky):
— Naval (@naval) May 31, 2018
2/ Who: @sweatystartup
What: Actions to wealth creation
Tweet:
How to get rich without getting lucky:
— Nick Huber (@sweatystartup) September 28, 2020
Find a way to make $100 an hour doing something simple IN YOUR TOWN.
Do it until you have $10k+ in the bank and you\u2019re too busy to sell new customers.
Hire employee for $25 / hr to do what you do so you can sell new customers.
Repeat.
3/ Who: @RomeenSheth
What: Early career
Early career years are painful.
— Romeen Sheth (@RomeenSheth) February 8, 2022
You feel like an idiot 98% of the time - lost, confused and insecure.
I wish I had a cheat sheet of principles for my first job.
So I put one together.
Here are 20 things about building a career I wish I knew sooner:
4/ Who: @heykahn
What: Career
The first years of your career are brutal.
— Zain Kahn (@heykahn) January 25, 2022
You're on your own and you have no clue what you're doing.
I wish I had a guide back then \u2015 so I made my own.
And I went from 0 to VP in 3 years.
Here are 11 principles to accelerate your career now:
Over 3.5 billion tweets are posted each week.
But most people are reading the wrong ones.
Here are the 10 best tweets from the week guaranteed to make you smarter:
1/ Who: @KurtisHanni
Topic: Build an elite
2/ Who: @heykahn
Topic: Become an effective decision
3/ Who: @amandanat
Topic: Hot takes on life, careers and
4/ Who: @EvergreenMEP
Topic: Upgrade your
But most people are reading the wrong ones.
Here are the 10 best tweets from the week guaranteed to make you smarter:
1/ Who: @KurtisHanni
Topic: Build an elite
An introvert's guide to elite networking.
— Kurtis Hanni (@KurtisHanni) March 8, 2022
9 tips to build a network:
2/ Who: @heykahn
Topic: Become an effective decision
The world's most powerful skill:
— Zain Kahn (@heykahn) March 12, 2022
Effective decision-making.
But colleges eat up 4 years of our lives and don't even bother teaching it.
Instead, here are 10 quick lessons from psychology that will upgrade your decision-making in the next 5 minutes:
3/ Who: @amandanat
Topic: Hot takes on life, careers and
I'm having a glass of whiskey after a long day.
— Amanda Natividad (@amandanat) March 9, 2022
Some spicy takes about life, careers, and creating:
4/ Who: @EvergreenMEP
Topic: Upgrade your
I have worked with dozens of startup founders and hundreds of their leaders.
— Greg Moran \U0001f30e Evergreen Mountain Equity Partners (@EvergreenMEP) March 13, 2022
The biggest reason they don't achieve what they desire?
Founders hang on to leaders that can't scale.
Here are 6 ways to succeed faster by upgrading your leadership.
Climbing the corporate ladder takes time.
10 threads that will accelerate your career:
1/ Who: @RomeenSheth
What: Get in half way up the ladder
Tweet:
2/ Who: @slizagna
What: Resume
3/ Who: @heykahn
What: Soft skill
4/ Who: @SahilBloom
What: Nail the
10 threads that will accelerate your career:
1/ Who: @RomeenSheth
What: Get in half way up the ladder
Tweet:
The ultimate hack to 10x your career:
— Romeen Sheth (@RomeenSheth) November 2, 2021
Enter the Side Door.
Let's break it down \U0001f447\U0001f447\U0001f447
2/ Who: @slizagna
What: Resume
resume tips I have learned as a recruiter at a fortune 100 company (targeted towards college students), a thread:
— SLIZ (@slizagna) February 2, 2021
3/ Who: @heykahn
What: Soft skill
Hard skills get you hired.
— Zain Kahn (@heykahn) October 12, 2021
But soft skills get you promoted.
I went from 0 to VP in 3 years.
Here are 11 soft skills to accelerate your career:
4/ Who: @SahilBloom
What: Nail the
The interview process is ultra-competitive.
— Sahil Bloom (@SahilBloom) August 7, 2021
But with proper preparation, it is possible to stand out.
THREAD: 20 common interview questions, what they really mean, and how to nail them:
More from All
You May Also Like
1/ 👋 Excited to share what we’ve been building at https://t.co/GOQJ7LjQ2t + we are going to tweetstorm our progress every week!
Week 1 highlights: getting shortlisted for YC W2019🤞, acquiring a premium domain💰, meeting Substack's @hamishmckenzie and Stripe CEO @patrickc 🤩
2/ So what is Brew?
brew / bru : / to make (beer, coffee etc.) / verb: begin to develop 🌱
A place for you to enjoy premium content while supporting your favorite creators. Sort of like a ‘Consumer-facing Patreon’ cc @jackconte
(we’re still working on the pitch)
3/ So, why be so transparent? Two words: launch strategy.
jk 😅 a) I loooove doing something consistently for a long period of time b) limited downside and infinite upside (feedback, accountability, reach).
cc @altimor, @pmarca
4/ https://t.co/GOQJ7LjQ2t domain 🍻
It started with a cold email. Guess what? He was using BuyMeACoffee on his blog, and was excited to hear about what we're building next. Within 2w, we signed the deal at @Escrowcom's SF office. You’re a pleasure to work with @MichaelCyger!
5/ @ycombinator's invite for the in-person interview arrived that evening. Quite a day!
Thanks @patio11 for the thoughtful feedback on our YC application, and @gabhubert for your directions on positioning the product — set the tone for our pitch!
Week 1 highlights: getting shortlisted for YC W2019🤞, acquiring a premium domain💰, meeting Substack's @hamishmckenzie and Stripe CEO @patrickc 🤩
2/ So what is Brew?
brew / bru : / to make (beer, coffee etc.) / verb: begin to develop 🌱
A place for you to enjoy premium content while supporting your favorite creators. Sort of like a ‘Consumer-facing Patreon’ cc @jackconte
(we’re still working on the pitch)
3/ So, why be so transparent? Two words: launch strategy.
jk 😅 a) I loooove doing something consistently for a long period of time b) limited downside and infinite upside (feedback, accountability, reach).
cc @altimor, @pmarca
4/ https://t.co/GOQJ7LjQ2t domain 🍻
It started with a cold email. Guess what? He was using BuyMeACoffee on his blog, and was excited to hear about what we're building next. Within 2w, we signed the deal at @Escrowcom's SF office. You’re a pleasure to work with @MichaelCyger!
5/ @ycombinator's invite for the in-person interview arrived that evening. Quite a day!
Thanks @patio11 for the thoughtful feedback on our YC application, and @gabhubert for your directions on positioning the product — set the tone for our pitch!
The entire discussion around Facebook’s disclosures of what happened in 2016 is very frustrating. No exec stopped any investigations, but there were a lot of heated discussions about what to publish and when.
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.
The story doesn\u2019t say you were told not to... it says you did so without approval and they tried to obfuscate what you found. Is that true?
— Sarah Frier (@sarahfrier) November 15, 2018
In the spring and summer of 2016, as reported by the Times, activity we traced to GRU was reported to the FBI. This was the standard model of interaction companies used for nation-state attacks against likely US targeted.
In the Spring of 2017, after a deep dive into the Fake News phenomena, the security team wanted to publish an update that covered what we had learned. At this point, we didn’t have any advertising content or the big IRA cluster, but we did know about the GRU model.
This report when through dozens of edits as different equities were represented. I did not have any meetings with Sheryl on the paper, but I can’t speak to whether she was in the loop with my higher-ups.
In the end, the difficult question of attribution was settled by us pointing to the DNI report instead of saying Russia or GRU directly. In my pre-briefs with members of Congress, I made it clear that we believed this action was GRU.