MOIC tells you how many times you multiplied your money. Invest $1, get back $3 = 3x MOIC. Simple, powerful, but blind to how long it took.
Imagine you put $10 into a magical piggy bank. A few years later, you open it and find $30 inside.
MOIC is just asking: "How many times bigger did my money get?"
You put in $10, you got $30. That's 3 times bigger. So your MOIC is 3x.
If you got back $50? That's 5x. If you only got $10 back? That's 1x (you broke even). If you got $5 back? That's 0.5x (you lost money).
It's like asking: "For every dollar I gave you, how many dollars did you give back?"
MOIC stands for "Multiple on Invested Capital" — it's one of the most important numbers in venture capital and private equity.
When investors put money into startups or companies, they need a simple way to measure success. MOIC answers: "How many times did we multiply the money?"
A VC fund invests $5 million in a startup. Years later, the startup gets acquired and the fund receives $25 million.
MOIC = $25M ÷ $5M = 5.0x
Why it matters: Limited Partners (the people who give money to VCs) use MOIC to compare funds. A fund that returns 3x is better than one that returns 2x — at least on paper.
What's "good"? In VC, a 3x fund MOIC is considered strong. Individual deals can range from 0x (total loss) to 100x+ (rare home runs like early Uber or Airbnb investments).
MOIC has a blind spot: it ignores time.
Consider two investments:
Invest $10M → Get $30M back in 3 years → MOIC = 3.0x
Invest $10M → Get $30M back in 10 years → MOIC = 3.0x
Same MOIC, but Investment A is clearly better — you got your money back faster and could reinvest it.
This is why investors also track IRR (Internal Rate of Return) — the annualized percentage return that accounts for timing.
Realized vs. unrealized MOIC:
Gross vs. net MOIC: Gross is before fees; Net is what LPs actually receive after management fees and carried interest. A 3.0x gross might be ~2.3x net.
How MOIC gets calculated in practice:
Or equivalently: DPI + RVPI where DPI is "Distributions to Paid-In" and RVPI is "Residual Value to Paid-In."
The valuation problem: Unrealized MOIC depends on how you mark your portfolio. Private companies don't have stock prices, so GPs estimate "fair value." This creates room for... optimism.
Common MOIC inflation tactics:
The J-Curve reality: Young funds typically show low or negative MOIC because they've deployed capital but companies haven't matured. MOIC improves over time as exits happen — making vintage year comparisons tricky.
Benchmark context (VC funds):
These benchmarks shift with vintage years — 2010-2012 vintages looked spectacular; 2021 vintages are struggling.
The great denominator debate: When public markets fall, institutional investors become over-allocated to private markets (the "denominator effect"). This should force selling, but illiquidity means reported MOICs stay high while true liquidation value may be lower. How should LPs think about MOIC when marks are stale?
GP-led secondaries and MOIC manipulation: The explosion of continuation vehicles raises a fundamental question: if a GP can sell a company to... themselves (a new fund), at a price they set, with LPs who can either roll or cash out at that price — is the resulting MOIC meaningful? Some argue it's legitimate price discovery; critics call it "marking your own homework."
NAV lending distortions: Funds increasingly borrow against portfolio NAV to fund distributions. This creates cash returns (boosting DPI) without actual exits. The MOIC looks better, but leverage adds risk. Should levered distributions count the same as exit proceeds?
The IRR/MOIC divergence problem: Subscription lines can create absurd scenarios: high IRR (because money was "in" briefly) but modest MOIC. Which matters more? Industry is split. Some LPs now demand "IRR without lines" reporting.
Cross-cycle comparability: A 3x MOIC in 2012-2022 (zero rates, multiple expansion) is not the same as 3x in 2022-2032 (higher rates, compression). Should we risk-adjust MOIC? Against what benchmark? Public equities? The risk-free rate? No consensus exists.
The "paper MOIC" reckoning: 2021-vintage funds reported strong early MOICs based on up-round markups. Now facing markdowns and slow exits, the gap between reported and realizable MOIC is widening. Some LPs are pushing for more conservative marking — but GPs resist because it affects fundraising.
What experts argue about:
The emerging view: Sophisticated LPs increasingly treat reported MOIC as one data point, not gospel. They stress-test unrealized marks, haircut continuation fund "exits," and focus on DPI for mature funds. The metric isn't broken — but it requires context that most reporting doesn't provide.