In-Kind Distribution

An in-kind distribution (or stock distribution) occurs when a VC fund distributes actual shares of a portfolio company to LPs rather than selling shares and distributing cash. This most commonly happens after a portfolio company's IPO — the fund distributes its shares to LPs who then hold publicly traded stock. In-kind distributions allow LPs to manage their own tax timing and exit strategy (they can sell shares when they choose, rather than being forced out at fund liquidation). For LPs, in-kind distributions require custodial infrastructure to receive and hold public company shares. From the fund's perspective, in-kind distributions count toward DPI (distributions to paid-in capital) using the market value of shares distributed.