It is difficult for Angel and other individual investors to determine whether the investment returns offered through a given private placement are fair. This White Paper reviews ranges of investment yields (Return on investment or “ROI”) appropriate for various types of direct private investment in operating companies, including private debt, venture capital and private equity.
The most common methods for calculating return on investment (ROI) are first reviewed — including cash-on-cash, simple interest, and internal rate of return (IRR). Private investments are then contrasted with publicly registered investments. Subjects consist of financial accounting requirements, public market correlation, absolute return considerations, and third-party investment research. With this background, ranges of ROI are then presented for the major classes of private debt and private equity investment, which include Venture Capital, Private Equity, Senior Debt, and Subordinated Debt (Mezzanine Lending).
Since 1995 Carofin has acted as placement agent for over 200 security offerings involving the securities described.