Measuring performance in venture capital

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Hey folks! This week we’re diving into the various ways VCs measure the performance of their investments. If you’ve ever invested in public markets, you’re used to instant feedback. Stock tickers update by the second, financial reports are released quarterly, and analysts flood your feed with hot takes. Measuring performance is… well, immediate.

In private markets, there’s no daily price updates or public disclosures. Investments are locked up for years, and liquidity is scarce. So, how exactly do VCs measure performance when there’s no easy-to-check stock price?

Let’s dive in.

Firstly, most private companies don’t have a public valuation. So, investors typically value them based on their last funding round, a practice known as mark-to-market. If a startup raises a Series B at a $200M valuation, that becomes the reference point for all shareholders until the next round or exit event.

But here’s the thing: mark-to-market only tells part of the story. It doesn’t reflect true liquidity (could you actually sell those shares at that price today?) or how the business is performing between fundraising rounds. That’s why VCs look deeper.

Smart investors focus on metrics like:

• Revenue growth: Is the company scaling efficiently?

• CAC vs. LTV: Are they acquiring customers sustainably?

• Burn rate & runway: Can they survive long enough to hit the next milestone?

• Product-market fit: Is their solution sticking?

Ultimately though, LPs (the investors investing in VC funds, known as Limited Partners) want to see measurable outcomes. Private markets are notorious for their acronyms, which you’re probably quickly learning if you’ve been subscribed to The Unsophisticated Investor for a while. Measuring the value of a single company is useful, but LPs need to measure the performance of each fund they invest in.

Here is how they do that:

DPI (Distributions to Paid-In Capital)

This is a fancy way of saying: How much cash has been returned to investors versus how much they put in?

A DPI of 1.0x means investors have received back exactly what they invested. Anything above 1.0x? That’s profit in your pocket. DPI is a realised return metric, cash actually returned, not just paper gains. This is the most important of all metrics when it comes to measuring VC fund performance.

MOIC (Multiple on Invested Capital)

MOIC measures how much your investment has grown, including both realised and unrealised gains.

For example, if a fund invested €10M and its current value is €30M, the MOIC is 3.0x. However, keep in mind MOIC doesn’t account for time, €30M today vs. €30M ten years from now are not the same thing (which brings us to IRR).

IRR (Internal Rate of Return)

IRR factors in time, which is crucial. It measures the annualised return of an investment, including cash flows in and out over time.

A 3x MOIC sounds great, but if it takes 15 years to get there, your IRR might not look as attractive. VC funds typically target IRRs of 15% to 25%, but hitting those numbers depends heavily on exit timelines and market conditions.

TVPI (Total Value to Paid-In Capital)

TVPI is similar to MOIC but often the preferred metric for LPs.

It’s calculated as: (DPI + Remaining Portfolio Value) ÷ Paid-In Capital

It gives the total value of what’s been returned plus what’s still left in the portfolio. It helps investors get a sense of the full picture, realised and unrealised returns combined.

The J-Curve reminder

Remember the J-Curve effect? We spoke about this phenomenon in a previous newsletter which you can read here. It’s another important piece of the performance puzzle. Early in a VC fund’s life, returns often appear negative as capital is deployed and startups work toward growth (and some inevitably fail). It’s only later, sometimes 7 to 10 years in, that successful exits flip the curve upwards.

Why it matters for you

Private markets require a different mindset to public markets. The instant gratification of daily price swings doesn’t exist. Instead, success is measured over years, using metrics like DPI, TVPI, and IRR to track real value creation.

Understanding this is key. In private markets patience isn’t optional, it’s the rule.

What we’ve been working on at Shuttle

• Closing the doors on yet another successful drop 💰

• Gathering feedback from our new members to improve the platform 🗣️

• Working on finalising our next opportunity, dropping in a few weeks 👀

• Increasing our organic marketing efforts 📢

• Working on our first affiliate partnership 🤝

The Unsophisticated Investor is brought to you by Scott & Rob, the founders of Shuttle. We’re both sick of private markets being a playground exclusive to the ultra-wealthy so we started a company to challenge the status-quo. Shuttle’s singular focus is to unlock private markets for Millennial and Gen Z retail investors and help them build wealth through the highest performing private market opportunities.

Scott & Rob
Shuttle Co-Founders