A multiple return measures how much capital an investment returns compared with the capital invested. A 10× return means ten dollars come back for every dollar invested. section 9.2
Why venture capital targets large multiples
A venture fund investing $20 million in one startup may need a 10× return to satisfy its investors. Because some investments fail, the fund may need roughly 50× its investment from a successful company—$1 billion, or unicorn, territory. section 9.2
Use the multiple to understand an investor’s decision:
- A 10× target raises the bar beyond simply returning the original capital. section 9.2
- Portfolio losses make unusually large winners important to the fund’s overall economics. section 9.2
