Venture Capital Return on Investment

Venture Capital Return on Investment
07 Mar

Return of investment is the magic word of investment. The term that is usually shortened to ROI is the key goal of investment. Venture capital return on investment is expected to be higher than normal.

Return on investment is one of the simple to understand terms of the financial world. It refers to what you get back for what you put in. If you invest one dollar, and the dollar earns .25 cents, your return on investment is 25%. Return on investment is also given for a time frame. In the same example above, if you invested a dollar and the dollar earns .25 cents every year for four years, your return on investment at the end of the four years would be 100%. You have doubled your money. The yearly return on investment would still be 25% per year. Venture capital return on investment should range at least 20% annually.learn more details on this website.

The goal of every venture capital deal is to equal the first one in the industries infant days. General George Doriot invested $70,000 in Digital Equipment Corporation. This is considered an early example of venture capital for two reasons. The first is that the good general did not invent a digital equipment widget, he merely provided the funding, and secondly digital equipment was a new technology about ready to break on the scene. It was a forerunner of the incredible digital, electronic, and computer world of today.

The venture capital for Digital Equipment Corporation came from the American Research and Development Corporation, which was the investment firm founded by General Doriot. The $70,000 was invested in 1957. When Digital went public in 1968, AR&DC starting getting a 101% annual return on investment. The $70,000 eventually grew into $355 million dollars.

There is no doubt that this was a special situation and a very lucky combination of foresight and timing. Despite that, it remains the star in the sky for the venture capitalist of today. It represents the kinds of deals they are aiming for and searching for. The more realistic goal figure of 20% return on investment represents this idea that they are willing to take great risk to realize a greater profit. The annual return on investment of regular savings and even risky, but more common investments like the stock market will be much lower.


Finance CSR

An understanding of return on investment is essential to invest. The higher than normal figures for venture capital return on investment tell us much about the driving force behind the venture capital deal. The other side of the picture is represented by the benefit to society of the technology made possible by venture capital. Yes, General Doriot and his associates became very rich, but Digital Equipment pioneered technology that changed the world. The financial rate of return is measured in percentage points; the social rate of return can not be calculated.go to for more details.

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