Fund Mechanics Advanced

MOIC (Multiple on Invested Capital)

The simple multiple of how much an investment returned relative to the amount invested.

Definition

MOIC measures the total return on an investment as a simple multiple of the original capital invested, without considering the time it took. A 5x MOIC means the investor got back 5 times their investment. MOIC can be calculated for individual deals or entire funds. Unlike IRR, MOIC does not account for the time value of money; a 3x return in 2 years is the same MOIC as 3x in 10 years.

Why it matters

MOIC is the simplest way to understand how well an investment performed. When assessing your company's potential outcome, think in MOIC terms: if investors paid $10/share and you expect a $30 exit price, that is a 3x MOIC for investors and potentially much higher for early employees with low strike prices.

Example

A VC invested $5M at $5/share for 1M shares. At IPO, shares are worth $40 each, so the investment is worth $40M. MOIC = $40M / $5M = 8x. The fund returns 8 times the capital on this single deal.

Related terms

DPI (Distributions to Paid-In)
The ratio of cash returned to LPs relative to total capital they invested; the realized return.
TVPI (Total Value to Paid-In)
The ratio of total fund value (realized + unrealized) to capital invested; includes paper gains.
IRR (Internal Rate of Return)
The annualized rate of return on an investment, accounting for the timing of cash flows.
Markup
An increase in the estimated value of a fund's investment, usually after an up round.
Carried Interest (Carry)
The GP's share of fund profits, typically 20%, which is their primary compensation incentive.
Venture Capital (VC)
Professional investment firms that fund high-growth startups in exchange for equity.

More from Fund Mechanics

This definition is an educational summary. It is not legal, tax, or investment advice. Specific terms in your equity grant or company documents may differ.