Four acronyms define how VC funds are measured. Mastering them is mandatory for GPs, LPs, and founders who want to understand what’s really going on inside a fund.

1. IRR — Internal Rate of Return

What it measures: Time-weighted annualized return.

Why it matters: Compares apples to apples across different durations and asset classes. A 3x in 3 years beats a 3x in 10 years dramatically in IRR terms.

How it’s calculated: The discount rate that makes the net present value of all cash flows equal to zero.

Limitation: IRR is highly sensitive to the timing of early distributions — a fund with one early hit can post a large IRR even if aggregate outcomes are mediocre.

2. MOIC — Multiple on Invested Capital

What it measures: Total value (realized + unrealized) divided by invested capital.

Why it matters: Simple, time-agnostic measure of efficiency.

Limitation: Ignores the holding period. A 3x in 3 years and a 3x in 15 years look identical in MOIC.

3. TVPI — Total Value to Paid-In

What it measures: (Distributions + Remaining NAV) / Paid-In Capital.

Why it matters: Captures everything the fund has returned or claims to be worth.

Limitation: NAV is a markup, not cash. Funds can carry inflated NAVs from boom-era markups.

4. DPI — Distributions to Paid-In

What it measures: Cash (+ stock distributions marked-to-market) actually returned to LPs divided by capital called.

Why it matters: This is the only metric that can’t be inflated by subjective markups. It’s real cash in the LP’s account.

In 2026: LPs treat DPI as the most important fund metric, especially for 2018–2022 vintages.

Worked example

• A $100M fund has:
  • Called $80M.
  • Distributed $120M.
  • Remaining NAV: $60M.
  • Paid-in (net of recycling): $80M.

Metrics:

• DPI = $120M / $80M = 1.5x.
• TVPI = ($120M + $60M) / $80M = 2.25x.
• MOIC = similar to TVPI but typically calculated on invested rather than called (context-dependent).
• IRR = depends on the timing of the flows; might be 18–25% for a fund this far along.

How these metrics evolve over a fund’s life

• Year 1–3: TVPI and MOIC slightly below 1x (the “J-curve”). DPI near 0.
• Year 4–6: Markups drive TVPI above 1x. DPI still modest.
• Year 7–10: Exits convert markups to DPI. TVPI and DPI converge.
• Year 10+: Residual positions remain until extended. Mature DPI reveals actual fund quality.

What LPs actually benchmark

• Top-quartile VC funds historically: ~3x net TVPI, 25%+ IRR.
• Top-decile: 5x+ net TVPI.
• Median: 1.5–2x net TVPI — often only 1.1–1.3x net DPI at maturity.

Common traps

1. Unrealized TVPI inflation: Many 2020–2021 funds carry 3x TVPI and under 0.5x DPI.
2. IRR gaming: Early small distributions can artificially boost IRR.
3. Fee-gross vs net reporting: Always ask for net-to-LP metrics.

Practical takeaway

1. GPs: Transparency on DPI trajectories builds LP trust faster than any markup narrative.
2. LPs: Track DPI milestones by vintage year; use them to gauge realistic re-up pacing.
3. Founders: Your investor’s fund vintage and DPI situation influence how patient they can be with your timeline.

Further reading

• NVCA 2026 Yearbook: https://nvca.org/press_releases/nvca-releases-2026-yearbook-charts-a-venture-industry-in-transition/