What is Total Value to Paid-In (TVPI)? How is it different from MOIC?
May 03, 2023
A metric of the ratio of Total Value of a fund based on valuation of the investments relative to the Paid-In capital. This is often used as an interim indicator of fund performance. TVPI is basically equivalent to MOIC.
TVPI is calculated as the sum of the realized return and the remaining unrealized return divided by the total capital paid in to the investment.
Here's the formula for TVPI:
TVPI = (Realized Value + Residual Value) / Total Paid-In Capital
In a simplified example, suppose a venture capitalist (VC) invested $5 million in a tech startup.
1. Realized Value: After two years, the VC sold a portion of their shares for $3 million. This amount is the realized value.
2. Residual Value: The VC still owns some shares in the startup, which are currently valued at $4 million. This amount is the residual or unrealized value.
3. Total Paid-In Capital: This is the initial amount that the VC invested in the startup, which in this case is $5 million.
So we can plug these numbers into the formula to calculate the TVPI:
TVPI = ($3 million Realized + $4 million Residual) / $5 million Paid-In Capital TVPI = $7 million / $5 million TVPI = 1.4x
The TVPI of 1.4x means that for each dollar invested, the VC has so far received 1.4 times that amount back in realized value, and still has additional unrealized value remaining in the investment.