Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Investors calculate their returns using metrics ROI and IRR.

So what’s the difference?

ROI is the return on investment without respect to time.

IRR is the internal rate of return which is the return on investment with respect to time.

If I invest $100K and 5 years later I receive a return of $300,000, then my ROI is 3x. If I receive my return 10 years later, my ROI is still 3x.

The same scenario with IRR gives a different result for each case as it takes into account the time of return. In this case, the 5-year return yields a 25% IRR, while a 10-year return yields a 12% IRR.

So how do you calculate IRR?

We can use an Excel spreadsheet for that.

1. Open up a column
2. Set each row as one year
3. Put the amount invested in year 1 (use a minus sign for this input)
4. Put the amount returned in the appropriate year (use a positive sign for this input)
5. Put a zero in each unfilled row
6. Apply the IRR formula from Excel to make the calculation

To understand your investment results better, you’ll find IRR is a better metric as it takes into account the time factor.


Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

Let’s go startup something today.
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Music courtesy of Bensound.

In this episode, Hall welcomes Stephen Collins, Founder of Luca Partners LLC.

Luca Partners provides strategy, finance, operating, and transactional advisory services to C-level leadership teams at venture and private equity-funded technology businesses.

Luca Partners are a team of highly-experienced technology industry professionals who are career operators that understand the challenges facing leadership teams. Their core competencies include strategic planning, investor and board management and communications, corporate finance/M&A including diligence and acquisition integration, go-to-market, and general business operations.

Stephen is a decisive and energetic high-growth-oriented business leader with extensive management expertise and experience particularly in developing disruptive and rapidly-growing markets. His experience ranges from Big 4 audit, to consumer products in emerging markets in Eastern Europe, and to the early days of online advertising. For the last twenty years, Stephen has been a C-level leader and board member in the software industry. During this period, Stephen’s pursuits included experience with on-premise enterprise software, SaaS, social media, e-commerce, programmatic advertising, and healthcare technology. During his career, Stephen has held the titles of Chief Executive Officer, President, Chief Financial Officer, Chief Information Officer, and Chief Innovation Officer reflecting his diverse skills as a leader and operator. Also, Stephen has extensive international experience having lived abroad and worked in more than 20 different countries. As a career operator, Stephen’s core functional competencies include strategic and operational leadership, management, finance and accounting, strategic finance, investor relations, mergers and acquisitions, talent acquisition, personnel development, and board responsibilities.

Stephen shares what excites him now in the sector. He advises entrepreneurs and investors and shares his investment thesis.

You can visit Luca Partners LLC at https://lucapartners.com/, and via LinkedIn at www.linkedin.com/company/d4d2/about/. 

Stephen can be contacted via email at collins@lucapartners.com, and via LinkedIn at www.linkedin.com/in/srcollins/. 

Music courtesy of Bensound.