What Return Can Investors Expect?

Investors can expect market, or near-market returns. Financial returns will vary deal to deal depending on deal structure, risk, and impact.

Let's start with the simple stuff, numbers, and then some comments we hope you'll find interesting.

The Numbers
Our annualized rate of return for 2015-2018 on FI led deals, those deals that the lead investor comes from the Accredited Network, was 10.4%. This assumes participation in every loan, and if you've never read it, do it now... past returns are no guarantee of future performance. This rate is comparable to most actual returns for VC funds. FI is unique in that we see and participate in both equity and debt deals. We've done debt in various forms - straight loans, royalty-based financing, and others - that result in healthy returns on investment that cashflow very quickly. This means that there is more liquidity to your investment, as opposed to Venture Capital which typically requires a 10 year holding period, FI loans are typically 12-48 months.

We also have non-financial returns, in the form of healthier soils, resilient environments, and stronger local communities...that's the good stuff and where we get excited.

By the way...

There's a Difference Between Target and Actual

• One often hears that VC or typical angel investors are looking for 5x, or 10x, or 20x their investment in return. That's because VC's and typical angels use a portfolio management strategy where they fully expect to loose ALL of the money they put into MOST of the deals they invest in. They're counting on just a few, maybe one, really big score (the Unicorn), to create all the returns for their entire portfolio. But in reality, VC firms - and more importantly, the Limited Partners (LPs) who actually provide the cash VC's use, rarely even beat index level stock market returns. So when you hear that someone is looking for "VC returns", that means they're hoping one company hits the home run so the whole portfolio makes something in the teens.

         FI believes in winning by hitting singles, we want every deal to perform and every company to           succeed.

Measurable and Un-Measurable

• What is the value of clean air for all to breathe? If everything everywhere was horribly polluted, how much would I pay for my family to spend an afternoon in a dome of clean fresh air? How is that admission fee - which is 100% lost after the visit is done - different than investing in solutions to the worlds problems even if it ends up 100% lost on my specific P&L? FI friend Marco Vangelisti makes a great case for the seriously considering non-financial returns as part of an individual's portfolio plan. If you'd like to transition to 100% impact, get a hold of him. He's a great resource, and a great guy, seriously.

Realized and Unrealized

• Beware people talking about their returns on deals, particularly convertible note or equity deals, where the actual culmination of the transaction... that is, the investors are paid... hasn't yet happened.
• Many investors will talk as if they're getting great returns if the companies they're invested in continue to raise money at higher and higher valuations. But that doesn't necessarily mean that specific investor gets all those increases, as each additional round further dilutes investors in previous rounds, and new liquidation terms from most recent investors change how much everyone gets on exit. You really can't calculate any of this until the company is sold, the deal is done, and the gains (or losses) are realized.

Want more information on investing? More info on Investing with FI here. Apply to our Everyone and Accredited Networks. Contact Us with questions.