Metrics & Performance
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Quick Answer
Unrealized gains represent the increase in value of portfolio investments that remain held by the fund.
Unrealized gains represent the increase in value of portfolio investments that remain held by the fund. These gains are reflected in fund valuations and TVPI calculations but haven't been converted to actual cash distributions. The gap between unrealized and realized gains is a critical risk factor in fund performance assessment.
In Practice
A fund invested $5M in a startup now valued at $50M based on its latest round. The $45M unrealized gain contributes to the fund's TVPI but could evaporate if the company's value declines before exit.
What good looks like
Why It Matters
Unrealized gains can be misleading — they depend on interim valuations that may not hold. Experienced LPs discount unrealized gains significantly when evaluating fund performance.
VC Beast Take
Unrealized gains create a dangerous illusion of success in venture capital. Paper markups can evaporate overnight when market conditions shift or follow-on rounds price companies down. The best GPs maintain conservative marking practices and focus on building companies that can deliver actual cash returns, not just impressive quarterly reports to LPs.
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What is DPI in venture capital?
DPI (Distributions to Paid-In Capital) measures how much cash a VC fund has actually returned to LPs relative to how much was invested. A DPI above 1x means LPs have gotten their money back.
What is TVPI and MOIC in venture capital?
TVPI (Total Value to Paid-In Capital) is the total value of a fund including unrealized gains. MOIC (Multiple on Invested Capital) is the gross investment multiple on a deal or fund.
Unrealized gains represent the increase in value of portfolio investments that remain held by the fund. These gains are reflected in fund valuations and TVPI calculations but haven't been converted to actual cash distributions.
Understanding Unrealized Gains is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Unrealized Gains falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
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