TVPI vs MOIC: How to Assess Fund Investment‍

Casey Fenton


Imagine you're a venture capitalist, and you've invested in two very different startups. The first is a trendy eco-friendly water bottle company. Two years in, it hasn't given any big cash payouts yet, but its valuation has exploded. Your Total Value to Paid-In (TVPI) metric is sky-high, convincing you that you're sitting on a goldmine yet to be unearthed.

Now, consider the second startup: a cutting-edge AI healthcare platform. In contrast to the first, it has provided consistent, if modest, cash returns. Using Multiple on Invested Capital (MOIC) to measure success, this startup is your immediate champion, giving you tangible financial rewards from the get-go.

But which startup is genuinely the better investment? The answer isn't as straightforward as it seems. Read on to understand these metrics, each offering unique insights, and discover how they can guide you to smarter investment decisions in the realm of private equity.

What is TVPI?

Total Value to Paid-In, or TVPI, sums up both your realized and unrealized gains, offering you a much-needed holistic view of your entire investment status. Essentially, TVPI helps you gauge whether your investment is on course to meet your financial objectives.


While the definition might sound complex, calculating TVPI is anything but. The formula is:

TVPI = Residual Value + Distributions Committed Capital / Committed Capital


Let's break down these components:

  • Residual Value: This is the current value of the investments still held in the fund's portfolio. In layman's terms, it's what you stand to gain if all unrealized investments were sold at their current valuation.

  • Distributions: This isn't limited to just cash payouts. Distributions can be in the form of cash, stock, or any other assets that have been returned to you, the limited partner. It’s the part of the investment that has already shown its worth by providing a tangible return.

  • Committed Capital: Simply put, this is the amount of money you, along with other limited partners, have promised to contribute to the fund. Consider this as your stake in the game.

So, why does TVPI matter to you as an investor? First, it offers an understanding of your portfolio. It tells you not just what you've gained so far (through distributions) but also what you stand to gain in the future (the residual value).

When comparing multiple funds or investment opportunities, TVPI acts as a great equalizer. It standardizes different types of gains into a single ratio, helping you compare apples to apples. If you're assessing a fund that's given high cash returns but has little growth potential, or vice versa, TVPI helps you see this clearly.

Finally, TVPI helps you understand the liquidity of your investment. A high residual value with low distributions might indicate that your investment is growing but not yet ripe for exit. On the other hand, high distributions and a low residual value could mean that the fund is nearing the end of its life cycle.

What is MOIC

MOIC stands for Multiple on Invested Capital. Unlike TVPI, MOIC only focuses on the cash that an investment returns. It is the ratio of the current or exit value of an investment to the amount of money initially invested.


The formula for MOIC is even simpler:

MOIC = Exit Value / Invested Capital

Let’s dissect the elements:

  • Exit Value: This is the price tag on your investment at the time of sale or its current market valuation if it's still part of the portfolio. Think of it as the gross amount you receive when cashing in your investment chips.

  • Invested Capital: The original amount of money you put into the fund or a specific investment. This is your ante in the high-stakes game of private equity.

So why should MOIC matter to you? For starters, MOIC is your straightforward, no-frills indicator of success. Did your investment double in value? Your MOIC is 2x. Triple? That's a 3x MOIC. It’s as direct as it gets and serves as a quick health check on your investment's performance.

MOIC is invaluable for evaluating the efficiency of your capital. If you're considering making additional contributions to a fund, a high MOIC suggests that your money has been well-utilized so far, boosting your confidence in committing more capital.

Moreover, MOIC shines when you're planning exits. If you have multiple investments and are deciding which to liquidate, a higher MOIC can be a decisive factor in making your choice. This is because it directly measures how much an investment has returned relative to your initial outlay.

Lastly, MOIC is objective. Unlike metrics that rely on projections or valuations, MOIC is rooted in actual financial returns. This makes it a reliable yardstick, free from the influence of market speculations and subjective valuations.

While MOIC may lack the all-encompassing scope of TVPI, its simplicity and focus on realized gains make it indispensable. It complements TVPI by providing the immediate financial snapshot that investors often need for tactical decision-making.

TVPI vs MOIC: What's the Difference?

Understanding TVPI and MOIC individually is only half the story. To make truly informed investment decisions, you need to know how these metrics contrast and complement each other. Below are the key differences that set TVPI and MOIC apart:

1. Scope of Measurement

Think of TVPI as your financial compass, offering a panoramic view of both your unrealized and realized gains. It encapsulates the total value of your investment, summing up what you've actually received and what's still on the table.

In contrast, MOIC is your investment speedometer. It only accounts for the present state or the exit value of your investment, ignoring unrealized gains. If TVPI tells the entire story, MOIC delivers the latest chapter.

2. Timing and Liquidity

This metric often varies with time, especially in the context of long-term investments. A high TVPI may mean good growth but could also indicate illiquidity if it's coupled with low distributions.

Meanwhile, MOIC provides an instantaneous snapshot, making it a better measure for short-term insights and liquidity. If you're looking for a quick return on investment, MOIC helps you gauge how quickly you can convert your investment to cash.

3. Complexity and Ease of Interpretation

Although the formula for TVPI is straightforward, its interpretation can be nuanced. Because it factors in both unrealized and realized gains, it requires you to consider future projections and current market conditions.

This metric, on the other hand, is extremely straightforward. It directly tells you how many times your original investment has multiplied. There’s no ambiguity: a 2x MOIC is always better than a 1.5x MOIC, assuming other factors are constant.

4. Risk Assessment

By offering a holistic view that includes unrealized gains, TVPI can help in assessing the risk profile of an investment. A balanced mix of distributions and residual value may indicate lower risk.

In MOIC, this metric is not particularly useful for assessing risk since it focuses only on realized returns or the current value of your investment. A high MOIC might be misleading if the risk associated with the investment is also high.

5. Portfolio Comparison and Fund Performance

Ideal for comparing different funds or investment opportunities, TVPI is a great equalizer. It standardizes varying types of gains, allowing you to compare apples to apples.

MOIC is better suited for comparing individual investments within the same portfolio or fund. It tells you which investments are currently performing better in terms of actual returns.

In other words, while TVPI gives you the big picture view—essential for long-term strategic planning—MOIC delivers immediate, tangible insights that are crucial for short-term tactical decisions. Knowing which to use when can make all the difference in your private equity investment journey.

What's the Common Denominator of TVPI vs MOIC?

While TVPI and MOIC serve different purposes and offer various insights, they share a fundamental common denominator: both metrics aim to quantify the performance of your investment. They're essentially two sides of the same coin, giving you both the macro and micro perspectives needed to make informed decisions.

1. Providing Investment Clarity

Both TVPI and MOIC aim to cut through the complexities of private equity investing by giving you clear, numerical insights. In a realm often laden with jargon and complexity, these metrics serve as your translators, converting intricate financials into straightforward ratios.

2. Investor-Centric Metrics

Another similarity is that both metrics are investor-centric. They're designed to tell you, the investor, what you're getting out of the deal. Neither metric is particularly concerned with the operational aspects of the fund or its portfolio companies; instead, they focus on your bottom line.

3. Guiding Strategic and Tactical Decisions

TVPI and MOIC are not just numbers to glance at and then forget. They are dynamic metrics, vital tools for guiding both your strategic and tactical decisions. While TVPI can help you determine long-term strategies like whether to stay invested in a fund, MOIC is beneficial for immediate tactical decisions such as planning exits or additional capital injections.

4. Emphasizing Real and Potential Returns

Both metrics emphasize the returns on your investment, either realized or potential. TVPI does this by including both distributions and residual value, giving you a more comprehensive look at what you stand to gain. MOIC, while focused on realized returns, helps you understand what you've already gained relative to what you put in.

5 Case Scenarios Illustrating TVPI vs MOIC

These real-world scenarios will help you get a firm grip on when to rely on TVPI and when MOIC might be the better tool for your investment decision-making.

Scenario 1: Early-Stage Startups

If you're investing in early-stage startups where the exit strategy is not yet clear, TVPI is invaluable. It accounts for both realized and unrealized gains, helping you gauge the investment's potential long-term value.

At this stage, MOIC is less helpful. Since there are no immediate exits or liquidation events, the focus isn’t on realized returns yet.

Scenario 2: Mature Companies Aiming for IPO

TVPI can be insightful but might show a skewed picture if the company's valuation skyrockets just before the IPO, inflating the residual value component.

Here, MOIC serves as a reality check, focusing solely on the current exit value of your investment. It gives you the information you need to decide whether to sell shares post-IPO or hold onto them.

Scenario 3: Diversified Portfolio

When you hold a diversified portfolio across different stages and industries, TVPI is your go-to metric. It gives you an aggregated view of your entire investment, making it easier to compare different opportunities.

MOIC is more useful for analyzing individual assets within your diversified portfolio. You can determine which assets have already proven to be profitable and consider rebalancing your portfolio accordingly.

Scenario 4: Planning for Partial Exits

TVPI may not offer the granularity needed for planning partial exits from certain investments within a fund.

MOIC is excellent for this. It tells you which investments have fetched the highest returns up to this point, helping you decide which assets you might want to partially exit from.

Scenario 5: Assessing a Fund's Lifecycle

If you're considering whether to reinvest in the next fund launched by the same management, TVPI is invaluable. A high residual value with low distributions may indicate that the fund still has significant growth potential.

While MOIC can give you an idea of the fund’s track record in terms of realized gains, it won’t offer much insight into the fund's future prospects or its suitability for additional investment.

Each of these scenarios showcases the strengths and limitations of TVPI and MOIC in different investment contexts. By understanding these, you'll be better equipped to select the right metric for your specific investment decision-making needs.

Which One Should You Choose?

Neither is universally better; they serve different purposes. Use TVPI for a long-term, comprehensive view and MOIC for a quicker, more immediate understanding. Ideally, look at both to get a holistic view of your investment performance.

TVPI and MOIC both have their merits. Hence, by understanding what each represents and how to calculate them, you're arming yourself with valuable tools that can help you make smarter investment decisions in the realm of private equity. The next time you consider investing in a fund or want to evaluate your current portfolio, remember to weigh in both TVPI and MOIC for better gains.

If you want to know more about investment and diversifying your portfolio, feel free to browse Upstock’s blog here.

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Casey Fenton

Founder, Upstock & Couchsurfing, AI and Equity Innovator

Casey Fenton, the founder of Upstock & Couchsurfing and an AI and equity innovator, has revolutionized how we perceive and implement equity in the workplace. His foresight in creating platforms that not only connect people but also align their interests towards communal and corporate prosperity has established him as a pivotal figure in technology and community building. Casey speaks worldwide on topics including ownership mindset, worker equity, With Upstock and Couchsurfing, he has demonstrated an unparalleled expertise in harnessing technology for the betterment of community interaction and organizational benefits.

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