Hall Martin, storied angel investor from Texas, returns to the Compassionate Capitalist Podcast show with host Karen Rands to talk about his novel approach to negotiating a guarranteed ROI when investing in private companies. Both entrepreneurs and investors often focus their attention on the potential ROI of an investment based on an acquisition exit in 5 years. More times than not, that type of exit doesn't materialize because the company doesn't maintain the rate of growth originially forecasted to achieve the 4X in 5 years. As time goes on, the IRR - the Internal Rate of Return, lowers compared to a straight ROI multiple calculation. Under Hall's 3X in 3Years model, investors and entrepreneurs establish a contracted guarranteed return for the investor if the entrepreneur doesn't hit their milestones, misses their next round of venture finance and therefore fails to scale as originally proposed. This method benefits the entrepreneur to add incentive to their first money in investors, and benefits the investors because they know they have the option to get a return in 3 years that can be put back to work in the community. Karen and Hall cover many additional topics too.
This podcast was also created as a video and is available here: Youtube
Hall Martin is the founder and CEO of TEN Capital Network. His involvement in building and leading angel investor groups spans decades, beginning with the Central Texas Angel Network through to his current involvement with the Baylor Angel Network. His work with entrepreneurs also spans decades and many organizations. Learn more at http://TENCapital.group
Karen Rands is the best selling author of Inside Secrets to Angel Investors. KarenRands.co