There are four numbers every LP looks at when evaluating a VC fund: IRR, TVPI, DPI, and RVPI. Most GPs only talk about the first two. The smart LPs care most about the third.
Understanding venture capital fund performance measurement is not academic — it is the difference between an LP committing to a follow-on fund and walking away. If you are a founder trying to understand how your investors are compensated, a first-time LP doing due diligence, or an emerging manager building your track record narrative, this is the framework you need.
The Four Metrics of Venture Capital Fund Performance Measurement
| Metric | Formula | What It Measures | Top Quartile (Year 10) |
|---|---|---|---|
| IRR | Annualized time-weighted return on cash flows | Speed + magnitude of returns | 25%+ net |
| TVPI | (Distributions + Residual Value) / Paid-In | Total value created (realized + paper) | 3.0x+ |
| DPI | Distributions / Paid-In Capital | Actual cash returned to LPs | 1.0x+ |
| RVPI | Residual Value / Paid-In Capital | Unrealized paper value remaining | 1.5–2.0x (early funds) |
Source: Burgiss, Preqin, Cambridge Associates — median benchmarks across vintage years 2010–2020.
IRR: The Metric GPs Love and LPs Distrust
IRR is the annualized discount rate that makes the net present value of all fund cash flows equal zero. It rewards early distributions disproportionately because of time weighting — a dollar returned in year 3 boosts IRR far more than a dollar returned in year 9.
This creates perverse incentives. A fund that recycles capital aggressively or exits early can show a 35% IRR on a 1.8x TVPI, while a patient, concentrated fund showing a 3.5x TVPI may clock a 22% IRR because the big exits came in year 9. The LP in the second fund made meaningfully more money in absolute dollars.
Per Burgiss data, top-quartile VC fund net IRRs by vintage year run approximately:
- ▸2009 vintage: ~31% net IRR (best vintage in 20 years — rode the mobile, SaaS, and AI wave)
- ▸2015 vintage: ~22% net IRR (solid but hit late-stage valuation inflation)
- ▸2019 vintage: ~28% net IRR (benefited from 2021 ZIRP exits; early data still volatile)
- ▸2021 vintage: Negative to low single digits as of 2025 for most funds (paid peak prices, IPO window closed)
TVPI: The Headline Number That Lies in the First Five Years
TVPI is calculated as total value (distributions + unrealized NAV) divided by paid-in capital. It is the number most commonly cited in GP pitch decks and most commonly misunderstood by LPs who are new to the asset class.
The problem with TVPI in the early years of a fund is the "J-curve" effect. In years 1–4, the fund has paid management fees, incurred startup costs, and made investments that haven't yet appreciated. TVPI often sits below 1.0x — what looks like a struggling fund is completely normal. By year 5–7, markups on portfolio companies push TVPI above 1.5x for a healthy fund.
The benchmark: top-quartile VC funds typically reach 2.0x TVPI by year 7 and 3.0x+ by year 10. The median sits at 1.5x by year 10. Anything below 1.2x by year 10 is returning less than cost of capital after accounting for illiquidity premium. Check real-time VC performance data on the VC Performance Dashboard.
DPI: The Only Metric That Proves You Actually Made Money
DPI is brutal and honest. It measures distributions paid to LPs divided by capital called from LPs. A 1.0x DPI means LPs got their money back in cash. A 0.3x DPI means 70% of the fund is still paper.
This is why DPI has become the dominant conversation in LP circles since 2022. The IPO window slammed shut. Secondary markets are discounted. M&A volume dried up. As a result, the vast majority of 2019–2022 vintage funds are sitting with DPI below 0.5x as of early 2026 — meaning most of the reported TVPI is paper.
1.5–2.0x
Top Quartile DPI (Year 10)
Cash returned exceeds invested capital
0.8–1.1x
Median DPI (Year 10)
Roughly returned capital in cash
<0.5x
Bottom Quartile DPI (Year 10)
Most value still on paper or lost
RVPI: Reading the Paper Pile
RVPI (Residual Value to Paid-In) is what's left in the ground. It is TVPI minus DPI — the portion of reported value that has not yet been converted to cash. For early-stage funds in years 1–6, RVPI dominates TVPI entirely. For a mature fund in year 10+, a high RVPI relative to DPI is a warning sign: it means exits haven't materialized.
RVPI is inherently subjective. It is based on the fair value markings GPs assign to portfolio companies using the most recent round price, comparable multiples, or discounted cash flow models. In 2021, RVPI was inflated by astronomical round valuations. In 2023–2024, many funds quietly marked down RVPI by 30–50% as portfolio companies raised down rounds or shut down. An LP that sees a high RVPI on a 2021-vintage fund should discount it aggressively until actual exits confirm it.
How LPs Actually Compare Fund Performance
Sophisticated LPs never evaluate a single fund in isolation. They benchmark against vintage year, stage strategy, and geography. A 2.0x TVPI for a 2009-vintage fund is mediocre — that vintage class produced 3.5x+ at the top. The same 2.0x TVPI for a 2021-vintage fund is actually competitive given how bad the market became.
The primary data sources LPs use for benchmarking:
- ▸Burgiss: Institutional-grade fund data from LP capital account statements; ~$8T in PE/VC data
- ▸Cambridge Associates: Widely cited quartile benchmarks; methodology skews toward larger established funds
- ▸Preqin: Broader coverage including emerging managers; data quality is more variable
- ▸Carta: Real-time early-stage fund data; excellent for seed and micro-fund benchmarking
- ▸AngelList: Syndicate and rolling fund performance data, useful for emerging manager comps
Benchmark your fund against peers on the Fund Benchmarking tool or compare VC and PE returns side-by-side on the VC/PE Performance Dashboard.
IRR is a marketing metric. TVPI is a progress metric. DPI is the only one that settles the debate.
Until a VC fund crosses 1.0x DPI, everything else is a forecast. LPs who lost patience with paper returns in 2023–2025 were not wrong — they were just early to a lesson the whole industry is now learning.
Track real-time VC fund performance data on the VC Performance Dashboard at Value Add VC. Originally published in the Trace Cohen newsletter.