What is a good IRR for venture capital?

Top-performing venture funds have historically delivered net IRRs above 20%; many funds deliver much less. Individual startup investments vary from total losses to very large multiples.

Multiple on invested capital: total value returned (or held) divided by the money invested. 3x means three times the money back.

IRR needs at least one negative and one positive cash flow. Check that the investment is entered as a negative number.

How do I calculate IRR in Excel?

Put the cash flows in a column, the investment as a negative number first, and use =IRR(range). Use =XIRR(values, dates) when the flows fall on irregular dates.

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IRR calculator for investors, with MOIC

The internal rate of return (IRR) is the yearly return that makes the present value of all an investment's cash flows add up to zero. Venture investors report it alongside MOIC (multiple on invested capital), which ignores time and simply compares money returned with money invested.

Cash flows by year: money in as a negative number, money back as positive.

Year 0Year 1Year 2Year 3Year 4Year 5

IRR (per year): 24.6%
MOIC: 3.00x
Net gain: 2

How it works

Enter each year's cash flow, with money invested as a negative number and money returned as a positive one. The calculator finds the discount rate at which the flows net to zero.

Example: invest 1 today and receive 3 after five years. The MOIC is 3.0x and the IRR is about 24.6% a year. If the same 3x came back after ten years, the IRR would fall to about 11.6%: the same multiple, a much weaker return, because the money was tied up twice as long.

IRR vs MOIC

MOIC answers "how much did we make?"; IRR answers "how fast?". Venture funds care about both: a high MOIC achieved over a very long period can still mean a mediocre IRR, while a quick 2x can show an impressive IRR on a small gain. Limited partners usually look at both, along with DPI (cash actually distributed).

Things to watch

Early exits inflate IRR: a quick small win can show a very high rate.
Unusual cash-flow patterns (several sign changes) can produce more than one mathematical IRR.
Paper valuations are not cash: IRR on unrealised marks can move a lot.

Gross IRR, net IRR and XIRR

Funds quote gross IRR on their investments and net IRR after fees and carried interest; the gap is often several percentage points. This calculator works in whole years. When cash flows happen on specific dates, spreadsheets use XIRR, which takes dates as well as amounts and gives a more precise answer for real deals.

Frequently asked questions

What is a good IRR for venture capital?: Top-performing venture funds have historically delivered net IRRs above 20%; many funds deliver much less. Individual startup investments vary from total losses to very large multiples.
What does MOIC mean?: Multiple on invested capital: total value returned (or held) divided by the money invested. 3x means three times the money back.
Why is my IRR blank?: IRR needs at least one negative and one positive cash flow. Check that the investment is entered as a negative number.
How do I calculate IRR in Excel?: Put the cash flows in a column, the investment as a negative number first, and use =IRR(range). Use =XIRR(values, dates) when the flows fall on irregular dates.

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Results are estimates for planning and learning, based only on the numbers you enter. They are not financial, tax or investment advice.