What is Distribution to Paid-In Capital (DPI)?

When you invest in private equity or venture capital funds, you’re handing over your money for 8-10 years with very little visibility into fund performance. You have to trust that the general partners (GPs) know what they’re doing, even though most updates are delayed and polished reports of unrealized gains.

And that’s where Distribution to Paid-In Capital (DPI) comes in.

DPI is a key metric that answers a simple but powerful question, which is, ‘How much of my invested capital have I actually gotten back?’It measures realized returns as distributions, in the form of cash or stock, relative to what you’ve invested.

What is DPI: The Basics

DPI is a ratio that compares how much money investors have put into a fund to how much money the fund has given back to them. You can calculate it based on the following formula:

• Distribution to Paid-in Capital DPI = Cumulative Distributions/Paid-in Capital

Here:

• Cumulative Distributions – The total amount of cash, stock, or other liquid assets paid back to investors.
  Paid-In Capital – The total amount of money that investors have put into the fund so far.

DPI is usually expressed as a multiple to help investors quickly assess the scale of returns relative to capital invested. For instance, a DPI of 0.6x means that you have recovered 60% of your original investment.

DPI’s Role in Fund Metrics

DPI is often used with two other metrics, which are:

• Residual Value to Paid-In Capital, or RVPI
• Total Value to Paid-In Capital, or TVPI

When used together, they provide a comprehensive view of a fund’s health. DPI shows what has been returned so far. RVPI represents the remaining value of the fund. TVPI is the sum of DPI and RVPI.

So, TVPI represents the total value created by the fund, both realized and unrealized.

In a previous article, we discussed how analyzing DPI, RVPI, and TVPI trends can provide insights regarding:

• The GPs’ ability to secure exits
• The accuracy of valuation methodologies used by GPs

DPI in the Real World

Let’s say you invest $8 million in a private equity fund as a Limited Partner (LP). During the first five years, the fund makes the following payments:

• Third year – $1.5 million
• Fourth year – $2 million
• Fifth year – $1 million

So far, you have received $4.5 million. Then, your DPI can be calculated as:

• DPI=$4.5 million$/8 million
• DPI= 0.5625

This essentially means you made a 56.25% recovery.

Let’s look at a different scenario. Suppose that, in Year 4, you get back $13 million from a venture capital fund where you invested $10 million.

Then, the DPI would be:

• DPI=$13 million$/10 million
• DPI=1.3

In this case, you have already made back all of your money and have earned a 30% realized gain. Even if the fund goes out of business tomorrow, this wouldn’t be a loss-making investment for you.

DPI shows realized returns, but it’s only one piece of the puzzle. We need to look at how DPI works with two other metrics to get a complete picture of how a fund is doing.

What DPI, IRR, and RoI Mean for Decisions

DPI, IRR, and RoI are three important metrics that show how well a fund is performing. Each metric sheds light on different aspects of performance:

• DPI (Distribution to Paid-In Capital) tells you how much money has been returned to the investor.
• Internal Rate of Return (IRR) shows how quickly returns are delivered over time.
• RoI (Return on Investment) shows how much money you made or lost as a percentage of the capital you put in.

Each metric can be helpful on its own. But together, they help investors make better choices about timing, risk, and realized value.

To better understand how these metrics together help in decision-making, consider the following set of examples:

Example 1: Same Outcome, Different Timelines

Metric	Fund A	Fund B
DPI	1.2x	1.2x
IRR	22%	8%
RoI	20%	20%

Both funds returned the same multiple, but Fund A delivered it faster, resulting in a significantly higher IRR. For investors who value speed and capital efficiency, this difference matters. The only way Fund B could have an edge over Fund A is if it had a much larger RVPI, i.e., potential returns.

Example 2: Real vs Unrealized Returns

Metric	Fund C	Fund D
DPI	0.9x	0.3x
RVPI	0.4x	1.5x
TVPI	1.3x	1.8x
IRR	16%	7%

Fund D shows more potential upside, but most of that value is unrealized. Fund C, while more modest on paper, has already returned most of the capital. By looking at IRRs, we can also conclude that Fund C is more time-efficient in creating value.

For investors prioritizing liquidity or downside protection, realized performance may carry more weight.

Don’t Believe These DPI Misreads

• High DPI Doesn’t Always Mean High Profit – DPI of 1x means you have gotten your money back. It just means that you broke even; profits are yet to be made. For you to make positive returns, DPI needs to be more than 1x.
• DPI Doesn’t Show Time – A DPI of 1.5x in three years is not the same as a DPI of 1.5x over 10 years. DPI doesn’t take into account the time value of money as IRR does.
• Non-Cash Distributions May Make DPI Look Higher – Instead of giving out cash, funds may ‘distribute’ public shares. This counts as DPI, even though the real value may go down before you sell. Check the form of the distribution to gain a better understanding of the fund’s ability to provide exits.

Eqvista – Turning Transparency into Trust!

DPI is an accurate measurement of investment recovery. It helps long-term investors, especially those who spread their money across several funds, to keep track of performance without noise.

Think of TVPI as your final destination, RVPI as the road ahead, and DPI as the distance already covered. Each metric tells a different part of the fund’s journey.

When assessing whether to invest in an ongoing fund or a new fund by GPs with ongoing funds, you should pay the most attention to DPI since it is the least susceptible to manipulation out of the three metrics.

To gain a comprehensive view of fund performance, you should analyze DPI along with IRR and RoI. This ensures that you understand the time-adjusted performance of the fund.

At Eqvista, we enable investors to keep track of investment performance through agile and accurate valuations. We ensure that your investment journey is not misled by projections. Contact us to learn more about our valuation services!