What are the expected IRRs?

Returns vary by GPU model, operator, and market conditions. Historical deals have delivered double-digit yields, though future performance may differ. Compute Labs has an internal mandate that the offer must project or estimate a 20% IRR before it is offered to investors.

IRR Framework

Minimum Standards

• Internal Mandate: All deals must project at least 20% IRR to be offered
• Conservative Modeling: We use conservative assumptions for utilization and pricing
• Stress Testing: Models are tested against various market scenarios

Factors Affecting IRR

Hardware Factors

• GPU Model: Latest generation hardware typically commands higher rates
• Performance Efficiency: More efficient chips generate better margins
• Hardware Costs: Lower acquisition costs improve returns

Market Factors

• Demand Cycles: AI training and inference demand fluctuations
• Competitive Pricing: Market rates for GPU compute services
• Energy Costs: Impact on operating expenses and net margins

Operational Factors

• Utilization Rates: Percentage of time GPUs are actively generating revenue
• Operator Efficiency: Quality of data center operations and sales
• Geographic Location: Regional pricing and cost variations

Historical Performance

Track Record

• Double-digit yields achieved across multiple vault deployments
• Consistent performance despite market volatility
• Strong utilization rates from enterprise AI demand

Performance Drivers

• Growing demand for AI compute resources
• Limited GPU supply creating pricing power
• Professional operator relationships ensuring consistent utilization

IRR Components

Revenue Generation

• Base Compute: Standard AI training and inference workloads
• Premium Services: Specialized high-performance computing
• Long-term Contracts: Stable revenue from enterprise partnerships

Cost Structure

• Operating Expenses: Power, cooling, maintenance, facility costs
• Management Fee: 10% of net proceeds to Compute Labs
• Depreciation: Tax advantages from hardware depreciation schedules

Value Creation

• Cash Flow: Monthly USDC distributions from operations
• Asset Appreciation: Potential upside from GPU value retention
• Tax Benefits: Depreciation shields for applicable investors

Risk Considerations

While we target 20%+ IRRs, actual returns depend on:

• Market demand for AI compute services
• Hardware performance and reliability
• Operator execution and utilization rates
• Broader economic and technology cycles

Past performance does not guarantee future results. All investments carry risk of loss.

Due Diligence Process

Before offering any deal, we conduct:

• Comprehensive financial modeling
• Operator due diligence and verification
• Market analysis and competitive positioning
• Stress testing under various scenarios

This rigorous approach helps ensure that projected returns are achievable while maintaining appropriate risk management standards.