IRR calculator for startup investments
IRR stands for internal rate of return.
IRR is the yearly return that allows for timing. For one investment and one exit it is MOIC (multiple on invested capital) to the power of 1 ÷ years, minus 1.
The formula
IRR = MOIC to the power of 1 ÷ years, less 1
Worked example: 22.9% a year
The example uses the guide's seed round, £200,000 for 20%, with a matching cap table, exit, fund and market.
- MOIC 2.80x over 5 years
- 2.80 ^ (1 ÷ 5) − 1 = 22.9%
Work out your IRR
Until you type a figure, the results show an example business. Fill in only what you know: from then on every result uses your figures alone, and nothing you type leaves your browser.
IRR for the example
Example22.9%
a year
- MOIC 2.80x over 5 years
- 2.80 ^ (1 ÷ 5) − 1 = 22.9%
- One payment in and one out. Follow-on cheques or part sales need a full cash-flow IRR.
Formula: MOIC to the power of 1 ÷ years, less 1.
- MOIC
- 2.80x
Everything your numbers show
For the example business: 27 of 27. Type your own figures to replace them. Select one for its page.
- Valuation£1,000,000post-money
- Pre-money valuation£800,000
- Post-money valuation£1,000,000
- Equity20.0%Equity sold
- Dilution70.0%kept by existing shareholders, down from 100.0%
- Option pool142,857new pool shares
- Fully diluted60.0%Fully diluted ownership
- SAFESimple agreement for future equity89,286shares
- Loan note96,429shares
- Pro rata rights£200,000Pro rata amount
- Liquidation preference£1,000,000to the investor
- Vesting180,000after 18 months
- Cliff120,000at month 12
- SEISSeed Enterprise Investment Scheme£10,000
- EISEnterprise Investment Scheme£6,000
- VCTVenture capital trust£4,000
- TAMTotal addressable market£240,000,000a year
- SAMServiceable available market£60,000,000a year
- SOMServiceable obtainable market£3,000,000a year
- Down roundDown round
- Up roundDown round
- Flat roundDown round
- MOICMultiple on invested capital2.80x
- IRRInternal rate of return22.9%a year
- TVPITotal value to paid-in capital1.50x
- DPIDistributions to paid-in capital0.40x
- Dry powder£24,000,000
How to read your result
Funds look at IRR alongside MOIC, because money returned sooner can be invested again.
Watch out for
This version assumes one cheque in and one payment out. Follow-on cheques need a full cash-flow IRR.
Last checked . Estimates only, not financial, tax or legal advice: check your accounts and documents, and take advice before you act. More terms in the startup glossary.