ROI, MOIC, and IRR: How Investors Measure Returns on Startup Investments

When a VC says they need a "10× return," they mean something precise — not a vague aspiration. Understanding the exact metrics investors use to measure returns helps you model your fundraising, set realistic expectations, and negotiate investment terms more effectively.

Return on Investment (ROI)

ROI = (Final value − Investment) ÷ Investment × 100

Simple but limited: it doesn't account for time. A 200% ROI in 1 year is very different from 200% over 10 years.

For venture capital, ROI is rarely the primary metric — MOIC and IRR are more useful.

Multiple on Invested Capital (MOIC)

MOIC = Exit proceeds ÷ Total investment

If a VC invested €1M and received €8M at exit: MOIC = 8×

• Below 1×: loss
• 1–2×: disappointing (returned capital or modest gain)
• 3×: acceptable
• 5×: good
• 10×+: excellent (what top-quartile VCs target)

MOIC's weakness: it ignores time. A 5× MOIC over 3 years is far better than 5× over 10 years.

Internal Rate of Return (IRR)

IRR is the annualised return that makes the net present value of all cash flows equal to zero. It accounts for both the multiple and the time taken to achieve it.

Example: €1M invested in 2021, €6M returned in 2025 (4 years) MOIC: 6× IRR: approximately 57%/year

Same €1M, €6M returned in 2029 (8 years) MOIC: 6× IRR: approximately 25%/year

Same MOIC, very different IRR. VCs use IRR to benchmark fund performance against other asset classes and competing funds.

VC Benchmark Expectations (European, 2026)

Note: these are targets on individual investments. Portfolio returns are much lower due to losses on other investments. Top-quartile VC funds return 3× on the full fund — most investments fail.

Exit Timing Matters

A 5× return in 3 years (IRR ~71%) is dramatically better than 5× in 8 years (IRR ~22%). Investors who exited at Series B in 3 years often outperform those who waited for a full IPO exit.

For founders, this means: investors may push for exits earlier than you expect, especially if the multiple achieved is solid even if not spectacular.

Model Your Investor Returns

[👉 Use the Investor Return (ROI / IRR) Calculator](/calculators/investor-return)

Enter investment amount, entry valuation, projected exit, and timeline to calculate MOIC, IRR, and how different exit scenarios affect investor returns — and your own proceeds.