IRR (Internal Rate of Return)

Definition

The annualized percentage return on invested capital. How investors measure if they actually beat the S&P 500 by betting on your startup.

Example Usage

Our fund's gross IRR is 25% across all exits, though that 45% IRR on our flagship company skews things.

Origin

Standard finance metric used across all investment types

Fun Fact

Top-tier VC firms aim for 30%+ IRRs; funds averaging below 15% are often considered underperformers.

Source: Financial performance metrics and venture capital terminology

Related Terms

Advanced

NRR (Net Revenue Retention)

How much revenue from existing customers you retain (and grow through upsells) versus how much you lose to churn. The metric that determines if you're actually growing.

🚀 Startup / VC

Intermediate

Burn Rate

The speed at which a startup spends its investors' money, measured in dollars per month and panic attacks per quarter. It's called burn rate because watching your cash evaporate feels exactly like watching something on fire.

👥 Human Resources🚀 Startup / VC

Beginner

passion tax

The lower compensation that employees accept to work at mission-driven startups or in attractive industries like gaming or entertainment. Employers exploit your dreams to underpay you.

🚀 Startup / VC

Advanced

washout round

A financing so dilutive that existing shareholders are essentially wiped out, often following multiple bridge rounds and broken promises. The financial equivalent of starting over but with more emotional baggage.

🚀 Startup / VC

Beginner

feature creep

The continuous addition of new features to a product beyond its original scope, usually resulting in bloated, confusing software that pleases no one. The disease killing promising MVPs since software began.

🚀 Startup / VC

Advanced

reserve ratio

The percentage of a VC fund set aside for follow-on investments in existing portfolio companies. The math that determines whether your investor can actually support you in the next round or just awkwardly watch.

🚀 Startup / VC

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