What rate of return do investors want on risky investments?
Lisa C asked:
We have started a video production business and are looking for investors. We have about $5 million in annual sales. What rate of return are investors looking for in a new business with a high level of risk?
We have started a video production business and are looking for investors. We have about $5 million in annual sales. What rate of return are investors looking for in a new business with a high level of risk?
wherbie_2001:
the higher the risk…the more you can gain…or lose…be careful….
the rule of thumb is….if it sounds to good to be true…it probally isnt…..
Bank’s dont loan money to loosers…..thats why they have pawn shops….
what’s a good return ?…for a year?…if it’s a SURE thing……30 %
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May 24, 2009, 1:16 pmThin Kaboudit:
Smart investors looking for “risky investments” expect 20%, but will be happy with 15-18% per annum. Less than that, there are safer places to be; more than that is unrealistic…
May 25, 2009, 3:22 amJimmy B:
30% for a sure thing. lol. How ridiculous. The benchmark for a “sure thing” is government bonds and they return about 5-6% per annum.
You are basically asking what does venture capital return as an asset class (or what venture capitalists expect as a return.) Thomson Venture Economics reports that the average rate of return for all private equity firms was 13.7% per annum from ‘82-’02. If your investors are able to beat this rate, they should be pleased. They won’t, however, because the S&P with exponentially less risk returns almost that amount. Venture capital is a tough business and Thin is right, you will need to strive for near 20% returns to keep investors happy.
May 26, 2009, 4:42 pm