In public markets, returns often follow a Normal Distribution (Bell Curve). But in startup investing, returns follow a Power Law. A single “home run” investment often returns more than all other failed investments combined.

To measure the growth required for such a return over time, we use the Compound Annual Growth Rate (CAGR) formula:
$$CAGR = \left( \frac{V_{final}}{V_{initial}} \right)^{\frac{1}{t}} - 1$$
Where $V_{final}$ is the exit value, $V_{initial}$ is the investment, and $t$ is time