Understanding Key VC Fund Performance Metrics: TVPI, MOIC, and DPI + Free Template
Three critical metrics to measure to tell your fund story and a Google Sheet and Excel Calculator template for your VC fund.
Measuring the performance of your investments is essential for making informed portfolio decisions and effectively communicating results to both current and prospective Limited Partners (LPs).
The three critical metrics — Total Value to Paid-In Capital (TVPI), Multiple on Invested Capital (MOIC) and Distributions to Paid-In Capital (DPI) serve as foundational tools for fund managers.
At Graph Advisors, we build and maintain these models for the top VC funds we work with in a Fractional CFO capacity. In our commitment to transparency, we’re providing a free calculator for these metrics. It’s a quick way to calculate your fund’s TVPI, MOIC, and DPI in a clear and useful manner that can be shared internally or in a data room.
There are many excellent resources available for understanding these metrics. AngelList has a good overview, I also liked this mini PE article (bonus video explainer too), while AllVue (formerly Alta) has their own thoughts similar to my own below. Carta has excellent resources for diving deep into these metrics too. For VC Fund beginners, there are some great “VC 101” materials from places like BFP and Sapphire (also linked below).
Before diving in, it's worth noting: most portfolios look terrible before they look great.
Below we delve into each metric and provide a handy calculator and template for you to use for your own funds. For the purposes of this post we assume a firm that has three venture funds.
Total Value to Paid-In Capital (TVPI)
TVPI is a comprehensive performance metric that captures both realized and unrealized returns relative to the capital invested. It reflects the total value generated by the fund compared to the amount of capital contributed by investors.
Formula:
TVPI = Paid-In CapitalCumulative Distributions+Residual Value / Paid-In Capital
Cumulative Distributions: The total cash or stock distributions returned to investors.
Residual Value: The current unrealized value of the fund's remaining investments.
Paid-In Capital: The total capital invested into the fund by investors.
A TVPI greater than 1.0 indicates that the fund has generated value above the invested capital. It combines both what has been returned to investors and what remains invested, providing a holistic view of the fund's performance.
Multiple on Invested Capital (MOIC)
MOIC measures the multiple of the current value of an investment relative to the original amount invested, without considering the time value of money. It assesses the total return on investment.
Formula:
MOIC = Initial Investment Amount / Total Value of Investment
Total Value of Investment: The sum of realized returns (distributions) and unrealized value.
Initial Investment Amount: The original capital invested in the asset.
MOIC provides a straightforward indication of how many times over the original investment has grown. For instance, a MOIC of 2.0 means the investment has doubled in value.
Distributions to Paid-In Capital (DPI)
DPI focuses exclusively on the capital that has been returned to investors, relative to the capital they've invested. It measures the realized return and excludes any unrealized gains.
Formula:
DPI = Cumulative Distributions / Paid-In Capital
A DPI of 1.0 means investors have received back exactly what they put in. A DPI greater than 1.0 indicates that the fund has returned more capital to investors than they initially invested, highlighting actual liquidity events.
How The Metrics Craft Your Story
TVPI offers a complete picture of fund performance, combining both liquidated and unrealized investments.
MOIC provides a simple multiple that quantifies the growth of an individual investment or the fund as a whole.
DPI emphasizes the cash returns to investors, underscoring the fund's success in generating liquidity.
It’s important to recognize the potential friction between LPs and GPs regarding DPI. As BFP aptly notes:
Thoughtful and long-term oriented GPs understand that maximizing cash-on-cash return of an investment may take many years. Seeing as many LPs do focus on DPI as a key performance indicator, however, some GP’s may feel the pressure to deliver on this metric early, in time for their next fundraise. In other words, divestments may happen sooner than should vis-à-vis the goal of maximizing long-term cash-on-cash returns.
It is also good to look at what happens to TVPI and Gross MOC if you recycle in the fund from this great post from Sapphire
Get Started with Our Free Calculator
Using our calculator is easy — it’s available in Google Sheets, or you can download it in Excel. You can start using this template today, totally free, or pay what you want if it adds value — think of it as buying us a cup of coffee!