Business Pitch Dictionary by pitch.dog
Exits, liquidity & investor returns · Working

Internal rate of return

Also called: IRR

ELI5

An annualised return measure that reflects timing of cash flows.

Used in conversation

“IRR can look high when money returns quickly.”

Definition

The discount rate that makes the net present value of an investment's cash flows equal zero.

Here “Internal rate of return” means: The discount rate that makes the net present value of an investment's cash flows equal zero.

Pitch context

You will see “Internal rate of return” in fundraising decks, data rooms, term sheets and investor conversations when the discussion reaches exits, liquidity & investor returns.

Why it matters: In exits, liquidity & investor returns, a loose definition can change rights, obligations, approval, disclosure or enforceability.

Caution

Meaning, enforceability and required process vary by jurisdiction and agreement; this definition is not legal advice.

Sources & evidence · 6

Direct term-level sources and supporting source families.