Innovation ROI Calculator

Venture capitalist are seen as the wisest investors. But even for them finding the ideas that will return 50 times the initial investment is proving difficult. In simple terms 1/3 of companies fail, 1/3 of companies return capital (or make a small amount of money), 1/3 of companies do really well.

How do you think your portfolio will perform?

We ran (( input.scenarios | currency('', 0, { thousandsSeparator: '.' }) )) scenarios to calculate the following histogram:

The most likely ROI is (( mostLikelyROI.row.bucket )), having a (( Math.round(mostLikelyROI.row.chance, 1) ))% chance of occuring.

However, there is a (( Math.round(result[0].chance, 1) ))% chance you lose (( result[0].bucket ))

To create this calculator we took the Correlation Ventures for 2003-2014 research, a study that shows the distribution of outcomes across over 21,000 financings and spanning the years 2003-2014:

Using this data as a benchmark we have created a calculator to help corporate leader understand in how many ideas they need to invest in in order to move the growth needle.

The calculator we’ve put together is using the Monte Carlo computational algorithm - random sampling is used in predicting the likelihood of the outcome of investing in ideas.

How it works

To use the calculator you need to know how many ideas are you going to invest in and how much will the initial investment be.

The model will randomly assign the ideas to one of the 6 tiers described in the study. Within each tier the calculator will randomly assign a corresponding return value for each idea falling in that tier.

It makes sense to run the calculator multiple times to see the effects of the Monte Carlo computational algorithm. You can also clearly see the difference between making an initial investment of € 500.000 in 10 startups, or € 50.000 in a 100 startups.

Interpreting the diagram

Since the certain outcomes are difficult to predict we are using random samples. The result of random sampling should be interpreted as follows: the highest likelihood value of the return is given by the tallest bar in the graph.

Special thanks for making this calculator happen go to Peter LePiane and The Corporate Startup.