How do you know if a direct private investment is offering a fair return? No matter whether an Angel or Venture-stage investor — or an accredited investor in growth companies — this is a thorny question. This White Paper first provides a framework to consider returns across the major categories of private investments. Carofin then gives you our assessment of the range of returns that you should expect from each.

The first step? Define the most common methods for calculating return on investment (ROI) for various forms of investment, both private debt and private equity, in private operating companies. Methods for calculating ROI can include cash-on-cash return, simple interest, and internal rate of return (IRR).

Investors cannot accept higher risk in a vacuum. We next compare and contrast financial accounting and disclosure requirements between direct private and publicly registered investments. Before moving on, we review why investors should consider private placements, such as lower correlation to public markets, absolute return considerations, and the higher returns private issuers offer.

Finally, this White paper outlines what ROI private investors should expect from Venture Capital andPrivate Equity, and Senior Debt and Subordinated Debt.