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This Week in Startups cover image

Venture returns, recovering startups, and VC conflicts | E1995

This Week in Startups

NOTE

Venture Capital's Delicate Balance: DPI and TVPI

In venture capital, achieving a high distribution to paid-in (DPI) ratio is crucial to providing actual cash returns to limited partners (LPs). Even if the majority of investments lose value, a singular successful investment can still yield positive results. Selling a portion of a successful investment raises DPI while leaving total value to paid-in (TVPI) intact. However, recent market conditions have limited the avenues for early DPI, as initial public offerings (IPOs) are scarce, founders are opting to maintain private ownership longer, and mergers and acquisitions (M&A) opportunities have diminished. Instead, secondary sales of shares and unique acquisitions are becoming common, impacting the traditional dynamics of cash distributions.

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