DPI, RVPI, TVPI, and IRR: Key Metrics for Evaluating VC Fund Performance

· 7 min read
venture-capital finance data-science
This post is for informational and educational purposes only. Nothing here is legal, tax, or investment advice. Consult qualified professionals before making any decisions based on this content.

When you’re evaluating a venture capital fund’s performance, four metrics come up again and again: Distributed to Paid-In (DPI), Residual Value to Paid-In (RVPI), Total Value to Paid-In (TVPI), and Internal Rate of Return (IRR). Each one captures a different piece of the picture, and understanding how they work together is more useful than fixating on any single number.

One thing worth calling out upfront: each of these metrics can be reported on a gross or net basis. Gross metrics show the fund’s performance before fees, expenses, and carried interest, which gives you a sense of how well the investment team is picking companies. Net metrics account for all those deductions and tell you what investors actually take home. The distinction matters more than you might think, especially when comparing across funds with different fee structures.

Let me walk through each one.

Distributed to Paid-In (DPI)

DPI is the realized return multiple. It measures how much capital has actually been paid back to LPs relative to what they invested. Of all the metrics we’ll cover, this one is the most concrete because it deals strictly in cash that has changed hands.

DPI answers a simple question: “How much money have we gotten back so far?”

A DPI of 1.0x means the fund has returned 100% of the capital called from LPs. That’s breakeven. A DPI of 2.0x means the fund has doubled investors’ money in actual distributions.

Why DPI matters

Unlike IRR or TVPI, there’s no estimation or time value component baked into DPI. It’s a straightforward measure of payoff. A high DPI typically means the fund has been successful in delivering exits and returning cash to investors.

DPI also tells you something about liquidity. A fund might have a great TVPI on paper, but if DPI is low, most of the value is still locked up in unrealized portfolio companies. Many LPs pay close attention to DPI because returned cash is what funds their own operations and future commitments.

Residual Value to Paid-In Capital (RVPI)

RVPI measures the value of a fund’s unrealized investments relative to the capital invested. It answers the question: “How much potential value is still sitting in the portfolio?”

The formula is straightforward:

RVPI = Residual Value (fair value of unrealized investments) / Paid-In Capital

Why RVPI matters

RVPI highlights the unrealized portion of a fund’s value, giving you a sense of what future distributions might look like. It complements DPI by providing the other half of the picture. A fund with low DPI but high RVPI has promising holdings that haven’t exited yet, whether that promise materializes is a different question.

Total Value to Paid-In (TVPI)

TVPI measures the total value generated by a fund relative to invested capital. It combines both realized returns (actual cash distributed) and unrealized returns (the current estimated value of holdings that haven’t been sold).

Mathematically:

TVPI = (Distributed Value + Residual Value) / Paid-In Capital

Which simplifies to:

TVPI = DPI + RVPI

Here’s a concrete example. If investors paid $10 million into a fund, have received $5 million back in distributions, and the remaining investments have an estimated value of $10 million, then the total value is $15 million and the TVPI is 1.5x.

Cambridge Associates data shows meaningful TVPI variation across vintage years, with the best vintages (notably mid-to-late 1990s and certain post-2008 vintages) producing substantially higher total value multiples.

Why TVPI matters

TVPI gives you a snapshot of a fund’s overall performance at a point in time by combining what’s been returned with what’s still in the portfolio. LPs and GPs use it to gauge how much the fund could return over its life, assuming unrealized holdings pan out.

The important caveat: TVPI depends on the valuations of unrealized investments, and those are estimates. TVPI can shift with market conditions, new funding rounds, or changes in how the fund marks its portfolio. It’s a useful indicator, but treat it as a moving target rather than a fixed number.

Internal Rate of Return (IRR)

IRR is the annualized return rate that a fund generates, factoring in the timing of cash flows. The time dimension matters a lot in venture capital, where the gap between capital calls and distributions can span a decade.

Technically, IRR is the compounded annual return rate that sets the net present value (NPV) of all contributions and distributions to zero. In plain terms, it answers: “What yearly growth rate is the fund achieving on the invested capital?”

Cambridge Associates data shows significant IRR variation by vintage year, with the strongest vintages generating 20%+ net IRR and weaker vintages producing flat or negative returns.

Why IRR matters

Investors use IRR because it provides a rate-based measure that makes comparisons across different asset classes, time horizons, and fund sizes more straightforward. A higher IRR means the fund is growing investors’ capital more rapidly, while a lower IRR suggests slower growth.

But here’s something that trips people up: a high IRR doesn’t guarantee strong total returns. A fund could show a high IRR by having a quick, small exit early on, even if the total dollars returned are modest. IRR is also sensitive to the timing of cash flows. Early distributions boost IRR more than later ones, all else being equal. For a meaningful evaluation, IRR should always be considered alongside multiples like TVPI and DPI. Aggregating or looking at IRRs across a group of vehicles can be extremely unintuitive math that even practitioners get wrong. Something like a “Median IRR” could be totally meaningless compared to a “Pooled IRR”, and outlier events can dramatically skew metrics for a very long time.

Using DPI, RVPI, TVPI, and IRR Together

No single metric gives you the full picture of fund performance. The real value comes from reading them together as complementary signals:

  • DPI shows actual cash returned. It’s the most concrete measure of realized success and liquidity.
  • RVPI captures unrealized value still in the portfolio, indicating potential future returns.
  • TVPI combines realized and unrealized value to show overall value creation.
  • IRR adds the time dimension, showing the annualized rate at which investor capital is growing.

Consider a fund with high TVPI but low DPI - it might have great investments that just haven’t exited yet, or it might be sitting on inflated marks. One with strong DPI but modest IRR returned the money but took a long time doing it. A fund with high IRR but low TVPI might have had one quick win on a small amount of capital.

By understanding what each metric is saying (and what it isn’t), LPs, finance teams, and newer investors can more accurately evaluate a venture fund’s track record and make better decisions about where to allocate capital.

Further Reading

Some of the data and analysis in this post originally appeared on the Aumni blog, which is no longer online.