IRR is calculated using the net present value (NPV) concept and is best calculated in Excel. It is determined by taking into account all the cash flows associated with an investment, including capital calls or drawdown notices, distributions, and fees. The Internal Rate of Return (IRR) is another calculation that helps Investors estimate the fund’s performance. Howard Marks – Oaktree Capital (Source: Oaktree) LPs receive their share net of carried and fees. However, MOIC is typically calculated across all rounds.įor example, if a VC fund invested $10 million into a startup and got $45 million in an exit, the MOIC would be 4.5x ($45/$10).Īt the VC fund’s level, MOIC is calculated by running the same formula across all the fund’s participations and weighting them for the check size. If the VC fund participated in several rounds, each round will have a different performance. Internal Rate of Return (IRR): IRR is a time-weighted metric that adjusts for cash flows coming into and out of investments over time to calculate the overall rate of return.īoth metrics offer insight into return performance and can be used to assess different VC funds’ performance relative to each other.Īt the startup level, MOIC is calculated for each Investor by dividing their exit proceeds (the portion of the total exit price they received, net of all fees) by the amount they invested in the startup over time.It is generally measured at the Investor’s liquidity event, i.e., in an exit such as an IPO or acquisition Multiple On Invested Capital (MOIC): MOIC measures the multiple times money was returned on the original investment.Venture Capital returns are typically calculated using two primary metrics: How Venture Capital Returns Are Calculated: MOIC, IRR, TVPI, & DPIĬalculating venture capital returns can be a difficult task, but understanding the process is essential for anyone looking to invest in VC funds, take money from them, or making a career with a VC firm.
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