Target return multiple

The multiple of invested capital an investor aims to receive from an individual investment, set high enough to compensate for investments that fail.

Example

An early-stage investor targeting 20x on each new deal.

Important

Earlier and riskier investments generally require higher targets.

Related terms

• Venture capital method — A valuation approach that estimates a company's exit value, divides by the return multiple an investor requires and adjusts for expected dilution to find the price that can be paid today.
• MOIC (multiple on invested capital) — Total value divided by the money put in - 300,000 back on 100,000 is 3.00x.

Lessons that explain it

• The VC method works backwards from the exit — The venture capital method starts from a plausible exit value, divides by the return an investor needs, and adjusts for future dilution to reach what the company can be worth today. (11 min)

All 578 terms in the Investing glossary