multiple of money
Multiple of Money is how many times over an investor gets their cash back when they sell their stake, worked out by dividing what they got by what they put in.
In plain English
If you gave someone ₦500,000 for a slice of their business, the question sitting calmly in the back of your mind is simple. Will I ever see this money again, and if I do, will it just be my ₦500,000 limping back to me, or something much fatter?
That question has an answer, and investors gave it a name. Multiple of Money, sometimes shortened to MoM, tells you how many times your original investment came back to you. Put in ₦500,000 and walk away with ₦2,000,000 later, and your multiple of money is 4x. Simple division, big feelings attached to it.
Say a Lagos angel investor puts ₦10,000,000 into a fintech startup for a stake in the company. Four years later, a bigger company buys the startup, and our investor's shares are now worth ₦40,000,000. That is a 4x multiple of money. Nobody needed a finance degree to understand that this was a good outcome.
Notice what multiple of money does not tell you. It says nothing about how long you waited. A 4x return after two years is thrilling. A 4x return after twelve years is, frankly, a bit sluggish once you consider what else that money could have done sitting in treasury bills or a diaspora relative's property in Lekki. That is why investors often pair multiple of money with another measure called IRR, which factors in time. Multiple of money answers 'how much', IRR answers 'how fast'.
For founders raising money, understanding this matters because it shapes what investors expect from you. Venture capital investors are often hunting for 3x to 10x multiples across their whole portfolio, knowing many individual bets will return little or nothing. A UK based angel putting £20,000 into a friend's app is doing calm mental arithmetic too, wondering whether this is a 1x story, a total loss, or the one that pays for several holidays.
An investor puts ₦2,000,000 into a small agritech business in Kaduna. Three years later, the business is acquired and her stake is worth ₦8,000,000. Her multiple of money is 8,000,000 divided by 2,000,000, which equals 4x.
Questions people ask
Is a higher multiple of money always better?
Generally yes, but always check how long it took to get there. A 3x return in one year beats a 5x return that took fifteen years, once you think about what that money could have earned elsewhere in the meantime.
How is multiple of money different from return on investment?
They are close cousins. ROI is usually expressed as a percentage gain, while multiple of money is expressed as a plain number like 2x or 5x. A 100% ROI and a 2x multiple of money are actually saying the same thing in different accents.
What multiple of money do investors typically expect from a startup?
It depends on the stage and the risk. Early stage investors often hope for 5x to 10x on their winners because so many other startups in their portfolio will return little or nothing, while later stage investors buying into a more proven business might be happy with 2x to 3x.
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