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faqs:analysis-irr:investors-want-high-returns [2016/09/04 14:14] mdavis created |
faqs:analysis-irr:investors-want-high-returns [2016/09/04 20:36] (current) mdavis |
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| - | ====== Why do investors want such high IRRs? ====== | + | ===== Why do investors want such high IRRs? ===== |
| All investors have a choice of investments; they can invest anywhere in the range from low-risk, low-return to high-risk, high-return. When they decide they want to invest in start-up companies, they //are // taking extremely high risk. In fact, the probability is high that they will lose their entire principal. No matter what you say or do, your company //is // a high risk venture. Therefore it had better have a corresponding high return for the investor. After all, if it offered a lower return, the investor could easily find lower-risk investments that returned such lower returns. To make matters even worse, as a founder/officer of the company, you have control of the transformation of the idea into a success. On the other hand, the investor has almost no control; they are for the most part, a silent partner. They are at your mercy. In short, they are taking total risk and have almost no control. The least they deserve is a high return on their investment. | All investors have a choice of investments; they can invest anywhere in the range from low-risk, low-return to high-risk, high-return. When they decide they want to invest in start-up companies, they //are // taking extremely high risk. In fact, the probability is high that they will lose their entire principal. No matter what you say or do, your company //is // a high risk venture. Therefore it had better have a corresponding high return for the investor. After all, if it offered a lower return, the investor could easily find lower-risk investments that returned such lower returns. To make matters even worse, as a founder/officer of the company, you have control of the transformation of the idea into a success. On the other hand, the investor has almost no control; they are for the most part, a silent partner. They are at your mercy. In short, they are taking total risk and have almost no control. The least they deserve is a high return on their investment. | ||
