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by Undo Capital
December 15, 2025
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What Is IRR (Internal Rate of Return)?

IRR (Internal Rate of Return) is a financial metric used to measure the annualised performance of an investment over time.

IRR (Internal Rate of Return) Meaning

The IRR meaning centres on comparing profitability across different investments. To define IRR in practice, it is the discount rate that makes the net present value (NPV) of all future cash flows from an investment equal to zero. A clear IRR definition helps investors assess how efficiently their capital is working, taking both time and returns into account. In venture capital and private equity, IRR is a key benchmark for fund performance and portfolio comparison. IRR stands for time-adjusted investment returns, not just headline profit.

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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.