IRR (Internal Rate of Return)

How it works

IRR is the discount rate that makes the net present value of an investment zero. For VC funds, it captures both how much was returned AND when — so a 3x return in 3 years has a much higher IRR than a 3x in 10 years. Top-quartile VC funds target 25%+ net IRR.

Related terms

• MOIC (Multiple on Invested Capital)
  MOIC is the ratio of an investment's total value (realized + unrealized) to the capital originally invested.
• DPI (Distributions to Paid-In capital)
  DPI is the ratio of actual cash returned to fund investors (LPs) to the capital they paid in — the realized portion of a fund's return.