If you’re a fund manager, tracking the performance of your portfolio companies is critical to benchmark your fund and showcase results to LPs to secure future investments.
Calculating the internal rate of return (IRR) is a common way VCs track the health of private companies without profitability metrics. IRR shows the annualized percent return an investor’s portfolio company or fund has earned (or expects to earn).
Using an IRR calculator or fund administrator like Carta are the best ways to get IRR metrics. For a free resource to calculate your portco’s IRR download the free template.