Venture capital investors should measure net IRR, TVPI or MOIC, DPI, RVPI, NAV, and portfolio-company operating performance. These investment metrics show reported returns, realized liquidity, remaining value, and the businesses' ability to keep growing. No single number provides a reliable verdict. Investors need a compact scorecard, relevant peer comparisons, and consistent calculations to distinguish durable performance from timing effects or paper gains.
Table of Contents
- Build a fund-level scorecard
- Why one return figure is not enough
- Monitor the companies before exits happen
- Compare funds on equal terms
- Demand consistent reporting
Build a fund-level scorecard
start with metrics that answer different questions about a fund's performance. Carta's fund-performance guidance supports reading these measures together: DPI plus RVPI equals TVPI. That relationship lets an investor separate realized returns from value that still depends on future exits.
Consider a fund with $10 million of paid-in capital, $3 million distributed, and $9 million in remaining value. Its DPI is 0.3, RVPI is 0.9, and TVPI is 1.2. The fund reports $1.20 of total value per dollar paid in, but investors have received only 30 cents in cash.
- Net IRR annualizes the timing and size of limited-partner cash flows.
- MOIC shows total value created per dollar invested.
- TVPI compares distributed cash plus remaining portfolio value with LP paid-in capital.
- DPI compares distributions with paid-in capital, revealing how much cash investors have received.
- RVPI compares remaining value with paid-in capital.
Why one return figure is not enough
IRR is useful because it incorporates time, but timing also makes it vulnerable to distortion. An early exit can lift IRR sharply, while delayed cash flows can suppress it, particularly when a fund is young. TVPI and MOIC add the missing view of total value. However, they do not tell investors how much of that value has become cash.
DPI supplies that answer and helps prevent unrealized gains from being mistaken for completed investment results. RVPI and NAV reveal how much performance remains on paper. NAV can change with valuation methods and market conditions, so investors should examine the assumptions behind it rather than treating it like cash. Read net IRR, TVPI, and DPI as a set. Then check the fund's age, its remaining NAV, and the share of total value still dependent on future exits.
Monitor the companies before exits happen
Fund-level returns are backward-looking or valuation-dependent. Portfolio-company metrics can reveal operating strength and future capital needs before an exit determines the final result. Carta identifies ARR or revenue growth, EBITDA, burn rate, runway, retention or churn, customer acquisition cost, and customer lifetime value as useful monitoring measures. Together, they show whether a company is expanding efficiently, retaining customers, and approaching another financing need.
Use metrics that fit each company's business model. ARR suits recurring-revenue businesses, while revenue growth may be more useful elsewhere. Burn and runway indicate funding pressure; retention and churn test customer durability; CAC and LTV help assess whether growth economics are improving or deteriorating. Managers can use these trends to prioritize support and follow-on capital. Investors should ask whether reported portfolio health comes from broad improvement or from a small number of companies masking weaker results elsewhere.
Compare funds on equal terms
A return becomes meaningful only after comparison with an appropriate benchmark. Cambridge Associates advises comparing net IRR, TVPI, and DPI with funds from a similar vintage, strategy, and investment stage in its US venture capital benchmark book. Vintage matters because funds begin investing at different times. Strategy and stage matter because an early-stage fund and a later-stage fund do not take the same risks or follow the same path to liquidity.
Public-market comparisons also require care. A money-weighted private-fund IRR should not be placed directly beside a public index's time-weighted return. A public-market-equivalent measure such as mPME instead applies the fund's cash-flow pattern to a public alternative, producing a more useful comparison. Before accepting a benchmark claim, verify the cohort, measurement date, performance basis, and treatment of cash flows. A precise calculation against an irrelevant peer group can still mislead.
Demand consistent reporting
Gross and net results must cover the same period and use the same methodology. The SEC states that mixing subscription-line treatment between gross and net IRR would violate its investment adviser marketing rule. Investors should request a clear explanation of calculation dates, paid-in capital, distributions, NAV, subscription-line treatment, and valuation methods.
They should also confirm whether figures are gross or net before comparing them with another fund or benchmark. Standardized reporting remains important, but investors should not cite the SEC's 2023 private-fund quarterly-statement rules as a current federal mandate. According to the SEC's private-fund adviser notice, the Fifth Circuit vacated those rules on June 5, 2024.