DPI (Distributed to Paid-In)

DPI (Distributed to Paid-In)

In the context of venture capital, DPI (Distributed to Paid-In) is a key metric used by Limited Partners (LPs) to assess the performance of their investment in a venture capital fund. It calculates the ratio of the money that has been returned to the investors to the money that has been invested in the fund. For example, a DPI of 1.0 means that investors have received distributions equal to their original investment, while a DPI greater than 1.0 indicates a profitable return.

DPI is particularly important when LPs are evaluating whether to commit to future funds managed by the same General Partner (GP). It provides an actual measure of cash returns, as opposed to unrealized gains or paper returns. Therefore, it's a hard metric that can influence LPs' decision-making.

However, DPI can be less useful in the early years of a fund's life when exits are rare. GPs and LPs should view DPI in the context of other performance metrics like IRR (Internal Rate of Return) and TVPI (Total Value to Paid-In) to get a comprehensive view of a fund's performance.

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