3 ms·
as an angel i have invested in a bunch of companies that later IPO'd. they then continued to significantly appreciate. the downside is that the time horizon is
by joshu 5y ago
as an angel i have invested in a bunch of companies that later IPO'd. they then continued to significantly appreciate.
the downside is that the time horizon is very long (ie one that i invested in 2006 IPOd in 2015 and continues to rise) so the absolute return is huge but the IRR drops. so people who benchmark everything by IRR will not see much improvement, even though the TVPI etc are still awesome.
- mbesto 5y agoAppreciate the insight. Curious to get your thought here... I do know that some investors look at TVPI and generally understand why, but isn't IRR the only thing that really matters? Philosophically speaking, you can't change the time variable - we're on a continuum - so at the end of the day the only thing that you are able to compare is how well a single dollar performs over time? I understand this doesn't take into consideration liquidity, but TVPI doesn't really either.
- jacobr1 5y agoI'm not sure how it works in VC, but with real-estate investing, the Cash-On-Cash return, which is basically the same as TVPI is extremely helpful when comparing investments that potentially have very different ways to structure the leverage in the deal.
- joshu 5y agotime is very punishing to IRR as it stretches on, but the returns accumulate. you cannot assume a dollar is fungible as you may not have been able to invest in the same thing at some other point.
- moneywoes 5y agoDo you believe that the IRR is highest in PE for this reason?