EIF Model #1

What returns might an ecosystem innovation fund (EIF) might get as described in my book, Innovation Casino: Grow Digital Revenue with an Ecosystem Innovation Fund.

Written by Eisaiah Engel on June 24, 2019, last updated on Sep 26, 2020.

My 2020 book, Innovation Casino: Grow Digital Revenue with an Ecosystem Innovation Fund, proposes that a large company can fund startups to build innovative products and services in its digital ecosystem and not lose principal if it makes 2,000 investments.

Overview:

The model simulates investments one-by-one. For each investment, six independently simulated variables are used to model valuation at the time of investment and the odds of achieving four liquidity scenarios: $100 million in annual sales, reaching “High-Growth Company” status with $2 million or more in annual sales and 20% annualized growth for three years, returning principal, and losing all value. Then, the model jumps into the future, choosing one of the four liquidity scenarios to calculate returns for the EIF.

Documentation for this model can be found in Appendix 1 of my book.

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