Run to Revenue
Merit is found in revenue from clients, rather than funds from investors
Future valuations – Internal Rate of Return (IRR) & Distributed to Paid-In (DPI) – depend on revenue both realized and recurring
IRR (Internal Rate of Return)
Definition: IRR is the annualized rate of return that makes the net present value (NPV) of all cash flows from an investment equal to zero. In simpler terms, it's the discount rate that equates the present value of expected future cash inflows to the initial investment.
Focus: IRR focuses on the overall profitability and growth potential of an investment over its entire holding period.
Interpretation: A higher IRR generally indicates a more attractive investment, as it implies a faster return on the initial capital.
DPI (Distributed to Paid-In)
Definition: DPI measures the amount of capital returned to investors (distributions) relative to the total amount of capital invested.
Focus: DPI emphasizes the actual cash returned to investors, providing a more tangible measure of investment performance.
Interpretation: A DPI greater than 1 indicates that investors have received more money back than they initially invested.
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