| Topic Name: |
vc valuation |
| Message Name: |
geez |
| Date Posted: |
03/28/2002 |
| In Reply To: |
let us assume we want a 30% IRR in four years. The company is valued today at $3.5 million. How do I decide how much of the company to purchase now? |
| Message: |
how did you get hired?
it doesn't matter how much of the co you want to buy now - your irr is going to depend on what you put in and how much you get out.
here's how to think about it...if it's 3.5M now, what's it going to be worth in 5 years, so that it gets you to a 30% IRR. IRR is closely related to NPV.
NPV = E (values i/1 + rate^i)
IRR is rate corresponding to NPV = 0.
so to get IRR:
0 = (% of 3.5M/1 + IRR^i)
you need to go to a bb and sell your soul, like i did.
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