Ten Bagger

Last updated: March 22, 2024

What Does Ten Bagger Mean?

A “ten bagger” is a term used by investors to describe an investment that is exited at 10 times the initial investment. The number can be changed to describe a different exit for the investment. For example, a “four bagger” describes an exit at four times the initial investment. The term was first introduced by Peter Lynch in his book, One Up On Wall Street. It is derived from baseball where extra-base hits are sometimes called two, three or four baggers.


Divestopedia Explains Ten Bagger

Private equity investors usually look for a minimum three times return on their investment, or a three bagger. The more refined metric used to measure return is the internal return on investment (IRR). For example, a 25% IRR, which is a typical minimum investment threshold for a PE investor, would equal to a three bagger over five years. Therefore, if a $10 million equity investment is made, the investor would need to realize $30 million after five years in order to realize a three bagger. Venture capital investors look for seven to 10 baggers because they are usually investing in less established, higher risk start-ups which require a significantly higher return.


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