Gross MOIC and net TVPI on the same twenty-eight companies, and where the 1.60 turns between them go.
MOIC is a gross multiple on the money that went into companies; TVPI is a net multiple on the money the investor paid in. On one illustrative 150 million venture fund, the multiple is 3.6376x on the initial cheques, 2.6741x gross MOIC on capital invested, 2.3265x on the commitment, and 2.0345x net TVPI. Same companies, same exits: the gap of 1.60 turns is fees, carry and the follow-on reserves.
Worked in full in Venture Capital by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
A venture fund's report, a manager's pitch deck and an investor's portfolio system can quote different multiples of the same fund, and none of them is wrong. Each answers a different question because each has a different numerator or denominator: proceeds before or after carry, divided by first cheques, by all capital invested, by the commitment, or by what was actually called including fees. Knowing which one is in front of you is the whole skill, because a manager comparing its 2.67x MOIC with another fund's 2.03x TVPI is comparing nothing.
For a fund that still holds companies, both multiples also carry marks: MOIC adds the fair value of unrealised positions to realised proceeds, and TVPI adds the fund's NAV, after accrued carry, to distributions. The fund below is fully realised, so every figure is cash and the differences come only from what is counted and what it is divided by.
The case is a fictional seed fund with twenty-eight companies. Each received an initial cheque; sixteen also received follow-on money from the reserve.
| Item | Value |
|---|---|
| Commitment | 150.0 |
| Management fee: 2% on commitment for 5 years, then on cost of unexited positions | 2% |
| Carried interest, whole of fund, above the commitment, no hurdle | 20% |
| Initial cheques (28 companies) | 62.5 |
| Follow-on reserves deployed | 68.0 |
| Capital invested in companies | 130.5 |
| Management fees over ten years | 21.47 |
| Capital called (invested plus fees) | 151.97 |
| Proceeds from initial cheques | 227.35 |
| Proceeds from reserves | 121.62 |
| Gross proceeds | 348.98 |
The fee was 3.00 a year for five years, then fell with the cost of positions still held: 2.09, 1.81, 1.41, 0.90 and 0.26. Calls exceed the commitment by 1.97 because distributions were recalled under the recycling provision and reinvested. The fund is fully realised, so NAV is zero and TVPI equals DPI.
1. Multiple on initial cheques: 227.35 / 62.5 = 3.6376x. Can this manager price a first round?
2. Gross MOIC on capital invested: 348.98 / 130.5 = 2.6741x. What did the money that reached companies do?
3. Gross multiple on commitment: 348.98 / 150.0 = 2.3265x. What did the fund do with the money promised?
Carry: 20% × (348.98 − 150.0) = 39.80. Distributions to investors: 348.98 − 39.80 = 309.18.
4. Net TVPI: (distributions + NAV) / paid-in = 309.18 / 151.97 = 2.0345x. On the commitment instead: 309.18 / 150.0 = 2.0612x.
In Excel: =SUMPRODUCT(Cheque,InitMult)/SUM(Cheque), =Proceeds/Invested, =Proceeds/Commitment and =(Dist+NAV)/PaidIn.
The invariant that catches most reading errors: the investor's net gain is distributions less calls, 309.18 − 151.97 = 157.21, and it must equal proceeds less fees less carry less capital invested, which also gives 157.21. A model that deducts fees from proceeds when they are already inside the calls counts them twice.
| Step | Multiple | Turns lost | Cause |
|---|---|---|---|
| Initial cheques | 3.6376x | First rounds only | |
| Capital invested (MOIC) | 2.6741x | 0.9635 | 52.11% of capital went in as follow-ons at higher prices |
| Commitment | 2.3265x | 0.3476 | Fees that never reached a company |
| Net, on commitment | 2.0612x | 0.2653 | Carried interest |
| Net TVPI, on paid-in | 2.0345x | 0.0267 | Recycled calls above the commitment |
The spread from top to bottom is 1.6031 turns, and the largest single step is not fees or carry, which together take 61.27, or 17.56 per cent of gross proceeds. It is the reserve: the follow-on half of the fund earned far less than the first cheques because it bought into the same companies at later, higher prices. That is a fund construction effect, and a deck quoting only the 3.64x on initial cheques hides it.
| Multiple | As realised | Top exit halved |
|---|---|---|
| Initial cheques | 3.64x | 2.63x |
| Gross MOIC on invested | 2.67x | 1.92x |
| Gross on commitment | 2.33x | 1.67x |
| Net on commitment | 2.06x | 1.53x |
| Net TVPI on paid-in | 2.03x | 1.51x |
One company out of twenty-eight moves every multiple by more than half a turn. The order of the multiples never changes, but the net figure falls proportionately less than the gross, because carry shrinks with the gain.
Comparing a gross MOIC with a net TVPI, or quoting "the multiple" without its denominator. A second, subtler one: computing TVPI on the commitment rather than paid-in capital. Here that flatters the fund slightly, 2.0612x against 2.0345x, because recycling pushed calls above the commitment; on a fund that calls less than its commitment it understates. Carry conventions matter too: measured against called capital rather than the commitment, carry is 39.40 and TVPI 2.0371x.
Read every venture multiple as a numerator over a denominator: 3.64x on first cheques, 2.67x gross MOIC, 2.33x on the commitment, 2.03x net TVPI on paid-in, all for one fund. The gap from the first-cheque multiple to net TVPI is mostly the reserve, not the fees. All twenty-eight positions, the fee schedule and the four multiples are live in the free workbook for this case. For the fee arithmetic from the other direction, see what gross multiple a VC fund needs to return 3x net.
Usually gross: proceeds from portfolio companies divided by the capital invested in them, before management fees and carried interest. In the worked fund MOIC is 348.98 / 130.5 = 2.6741x, while net TVPI, after fees and 39.80 of carry, is 309.18 / 151.97 = 2.0345x.
On paid-in capital, the capital actually called including fees. In the worked case paid-in is 151.97 because recalled distributions pushed calls above the 150.0 commitment, so TVPI on paid-in is 2.0345x against 2.0612x on the commitment.
Because follow-on reserves invest in the same companies later at higher prices and earn lower multiples. In the worked fund, initial cheques earned 3.6376x while 52.11 per cent of capital went in as follow-ons, pulling the blended MOIC down to 2.6741x.
This article is one calculation from Venture Capital. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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