Recruiter's Glossary

Examples: Deal Flow • IRR • Pay-to-Play

IRR

Term from Venture Capital industry explained for recruiters

IRR (Internal Rate of Return) is a key measurement tool used in venture capital and investment firms to evaluate how profitable investments are. Think of it as a report card that shows how well an investment performs over time, considering when money was invested and when returns were received. It's different from a simple calculation of profit because it factors in the timing of money movements. When you see this term in resumes, it usually means the person has experience in analyzing investment performance and making investment decisions.

Examples in Resumes

Achieved 25% IRR across portfolio of early-stage technology investments

Developed financial models to forecast IRR for potential investments

Managed $50M investment fund with average IRR of 20%

Analyzed Internal Rate of Return metrics for venture portfolio companies

Typical job title: "Investment Analysts"

Also try searching for:

Investment Associate Portfolio Manager Investment Analyst Venture Capital Associate Private Equity Associate Investment Manager Financial Analyst

Where to Find Investment Analysts

Professional Networks

Job Boards

Industry Resources

Example Interview Questions

Senior Level Questions

Q: How do you evaluate IRR when comparing investments with different time horizons?

Expected Answer: A senior candidate should explain how IRR helps compare investments of different durations, mention its limitations, and discuss alternative metrics they might use alongside IRR for a complete analysis.

Q: How would you explain the difference between IRR and cash-on-cash returns to limited partners?

Expected Answer: Should be able to clearly explain that IRR considers the timing of cash flows while cash-on-cash is a simpler measure of total return, and give examples of when each metric is most useful.

Mid Level Questions

Q: What factors might cause actual IRR to differ from projected IRR?

Expected Answer: Should discuss factors like unexpected market conditions, company performance, exit timing, and how these variables can impact returns.

Q: How do you calculate IRR for a portfolio that includes both realized and unrealized investments?

Expected Answer: Should explain the process of combining actual returns from exits with estimated values for current holdings to calculate portfolio IRR.

Junior Level Questions

Q: What is IRR and why is it important in venture capital?

Expected Answer: Should explain that IRR measures investment performance over time, considering both the size and timing of cash flows, and why this is particularly relevant for VC investments.

Q: What's the difference between gross IRR and net IRR?

Expected Answer: Should explain that gross IRR is the return before fees and expenses, while net IRR is what investors actually receive after all costs are deducted.