hebel. today · 4 November 202619 / 69
Business · Venture Capital Insights
Private equity performance faces a reckoning
Institutional investors and private equity firms often present target internal rates of return of 20% or higher, yet these figures frequently diverge from reality. Aswath Damodaran argues that such targets serve as marketing props…
From 6 newsletters · 1 min read · one thing to try
Institutional investors and private equity firms often present target internal rates of return of 20% or higher, yet these figures frequently diverge from reality (Musings on Markets). Aswath Damodaran argues that such targets serve as marketing props rather than financial metrics, as actual returns often mirror those of public index funds. When fund managers set these hurdle rates unrealistically high, they risk overreaching for speculative returns to compensate for fictional discount rates, which undermines the integrity of the investment process (Musings on Markets).
“The thing about coin-flip capitalism is that, about half the time, the coin lands tails.”
Commonplace
Conversely, some observers suggest that the growth of AI-driven companies is fundamentally altering the potential for venture-backed outcomes. While historical returns for software companies relied on capturing low-hanging fruit, the current scale of revenue growth in AI suggests that technology may finally be capable of eating the entire market (Investing 101). This shift potentially justifies larger valuations and different risk profiles, provided these companies transition from rapid revenue growth to sustainable cash generation.
The disagreement centers on whether the current performance of private assets reflects a new economic paradigm or a temporary bubble. While some believe AI-native businesses will redefine the scale of future exits, others maintain that the reliance on macroeconomic tailwinds in a high-interest-rate environment leaves investors exposed to significant downside risk (Commonplace).
- Saudi startups now face a median wait of 27 months to close subsequent funding rounds, a duration that has more than doubled in the last three years (صفر لواحد).
- European startups with at least one female founder raised 7.5 billion euros in 2025, accounting for 13% of total regional venture investment (THE BRIEF).
Try today · 30 min
Audit your potential investor's recent activity using the Mom Test criteria to strip away fluff.
List every verbal compliment or future promise an investor has given you and replace it with a record of a concrete, scheduled next meeting.
You need
- A list of all recent investor communications
- A calendar of scheduled partner meetings
Steps
- Identify every claim from an investor that relies on future promises or hypothetical scenarios.
- Filter out any feedback that lacks a specific, dated commitment.
- Categorize remaining interactions by the stage of the deal: compliment, discussion, scheduled meeting, or signed commitment.
- Discard any correspondence that does not involve a concrete, scheduled next step.