Fund Structure
Realization
The conversion of portfolio investment value into actual cash through an exit event — IPO, acquisition, or secondary sale.
Realization is when paper gains become real money. An investment is 'realized' when the company has been sold, gone public and shares have been distributed or sold, or when the fund has sold its position in a secondary transaction.
VCs are evaluated on both unrealized marks (TVPI) and realized returns (DPI). A fund with a strong track record of realizations — actual exits — is far more credible than one with high marks on paper.
In Practice
Benchmark's investment in Uber was fully realized through IPO distributions and subsequent share sales. The fund's 2011 vintage returned enormous multiples in realized cash — not just mark-to-market gains — making it one of the most successful venture funds in history.
Why It Matters
LPs increasingly demand that emerging managers show at least partial realizations — not just marks — before committing to subsequent funds. In a market with few exits, unrealized gains can persist for years before LPs see actual returns.