DPI Is the New Fundraising Deck

In today’s venture climate, Limited Partners (LPs) are laser-focused on Distributions to Paid-In capital (DPI), which represents the actual cash returned, and are far less impressed by lofty Total Value to Paid-In (TVPI), the on-paper gains. The fundraising downturn of 2024–25 has only sharpened this focus. In the current environment, DPI has effectively become the new fundraising deck: a tangible proof-point of a manager’s ability to deliver returns.

The reason for this shift originated in the frothy 2020-2021 era, when many funds boasted high TVPIs driven by unrealised mark-ups. But as markets corrected, those paper valuations proved fragile. LPs learned the hard way that a 3x TVPI can evaporate, whereas cash in hand doesn’t lie. With global private-market fundraising declining for a second year in a row by 2024 (amid higher interest rates and LPs grappling with resource allocation), investors have become choosier about re-upping commitments. They are prioritising managers who have proven they can return capital.

Recent data underscores the point. Carta’s analysis of 1,800 funds found that more than 60% of VC funds vintage 2019 had not returned anything to LPs after five years, a stark increase in delayed liquidity versus earlier vintages. In fact, only 9% of 2021-vintage funds had any DPI within three years, compared to 25% of 2017 vintages that did – thanks to the slow exit environment. 

Similarly, the Institutional Limited Partners Association (ILPA) noted that half of private funds raised between 2015–2018 still haven’t returned investors’ initial capital, even as they approach or exceed typical fund lifespans. For LPs, these statistics are sobering. While Internal Rate of Return (IRR) and TVPI still matter, DPI has taken precedence as the clearest evidence of success. 

For those raising new funds, this shift means your track record of distributions will be scrutinised more than ever. An impressive slide deck alone won’t cut it if your Fund I only shows unrealised gains. LPs in 2025 want to see that you can produce cash-on-cash returns. 

So how can an emerging manager respond? By proactively turning some of those paper gains into realised distributions responsibly - without undermining long-term value. The next sections provide an operational playbook to do just that.

Tactics to Actualise Cash Returns

Accelerating DPI requires a thoughtful strategy. Below are key tactics to generate liquidity responsibly from your portfolio, even before traditional exits materialise:

• Structured Exit Strategies: Wherever possible, structure an exit pathway at the time of investment. This might include negotiating terms that provide interim liquidity events like redemption rights or dividend provisions triggered after a certain period. Some innovative VC funds are experimenting with revenue-based financing or royalty deals as part of select investments. In these structures, the fund invests on the agreement that the company will share a small percentage of revenues or buy back equity over time, returning cash to investors prior to an ultimate exit. While not suitable for every startup (companies must have revenue and margins to support it), structured exits can turn an investment into a self-liquidating asset. The key is to bake liquidity into the deal upfront, rather than relying solely on an open-ended exit.
  
  
• Staged Secondary Sales: Another powerful DPI lever the secondary market. Rather than waiting for a full exit, a GP can execute staged secondaries. This involves selling a percentage of the fund’s position in a strong performer to a secondary buyer or as part of a late-stage funding round. This generates cash distributions while still keeping some upside on the table. In the past, GPs shunned secondaries for fear of signalling a lack of confidence, but this stigma has since faded. Top-tier firms like Insight Partners and NEA have used secondary continuation vehicles to give LPs liquidity while retaining their “trophy” assets for more upside. The secondary market itself is booming with a record ~$160B transacted in 2024 per StepStone Group, so buyers are out there.
• Revenue-Share Bridges: When exits are taking longer, consider bridging the gap with creative financing at the fund level. A revenue-share bridge involves structuring a deal (usually via a special-purpose vehicle or sidecar) where the fund provides additional capital to a portfolio company in exchange for near-term payments from the company’s revenues. Essentially, it’s a hybrid of venture debt and revenue financing: the company gets cash to extend its runway, and the investors get a defined payback (plus a premium) over a year or two, funded by the company’s ongoing sales. This tactic was historically rare in VC but is gaining attention as a way to produce interim DPI. It’s crucial to structure such bridges responsibly: the repayment amount must be reasonable so as not to strangle the company’s growth, and ideally, the company’s board and other investors align on the plan. Used judiciously, revenue-share can create a liquidity event out of a company that might otherwise only yield cash at exit. It turns “growth equity” into a partially yielding asset, which can be very attractive to liquidity-hungry LPs.

As always, these tactics should be evaluated within the context of your portfolio. They work best when tailored, and could backfire if utilised in the wrong situation. The overarching theme is to consider exits in advance. Rather than waiting indefinitely for the perfect exit, seek opportunities to responsibly crystallise some gains early while still aiming for high long-term returns on the remainder.

LP Messaging: Proving a Repeatable DPI Strategy

Generating distributions is only half the battle, as you also need to convince LPs that your early DPI is repeatable and intentional. The goal in your fundraising conversations is to show that your team has a clear operational strategy for liquidity management. This is where crafting a compelling DPI storyboard can make all the difference.

Start by framing your previous fund results as a narrative of planned liquidity events. For example, rather than simply stating your DPI, break down how that came to be and what you did to make it happen. By narrating these steps, you demonstrate an active approach to driving liquidity.

Crucially, emphasise repeatability. If you did a secondary sale once, explain that you have built relationships with secondary buyers and will systematically evaluate similar sales for the next fund when appropriate. If you negotiated structured exits (e.g. a redemption right or revenue-share) in a prior deal, highlight that as part of your playbook that can be applied in future investments when it fits. The message to LPs is: “We don’t leave liquidity to chance.” This gives prospective investors confidence that you won’t be just hoping for an IPO; instead, you’re actively managing for outcomes.

A useful tool here is a DPI storyboard slide in your pitch deck or data room. This could visually timeline the evolution of your fund’s DPI and the key drivers. It should tell the story of how you got from 0 to 0.5x DPI over time through specific actions. Include bullet points on what you learned from each liquidity event and how those learnings will inform your strategy going forward. Also, be candid about the context. LPs appreciate honesty about market timing and luck, as long as you can articulate how you’ll replicate the success under different conditions.

Finally, use LP references and testimonials if you can. If some of your current LPs benefited from early distributions, let them speak to how you communicated and delivered on that. Nothing hits home more than an existing investor’s stamp of approval. In your fundraising materials or meetings, drive home that your fund isn’t a black box that will make them wait 10+ years for a payout. Instead, you are building a distribution engine that will continue churning out returns, fund after fund. In a market where DPI has become the LP’s litmus test, being able to prove “we’ve done it, and here’s how we’ll do it again” is incredibly powerful.

Key Liquidity KPIs: Tracking What Matters to LPs

To reinforce your DPI-focused approach, it’s wise to track and share a set of liquidity-centric KPIs. These metrics demonstrate that you measure success not just by IRR or paper multiples, but by tangible cash results and the efficiency of getting there. Consider monitoring the following:

• Distribution Cadence: This measures how frequently and consistently you are returning capital. Rather than just total DPI, cadence looks at the number of distribution events per year or % of the fund distributed each year. An ideal scenario might show that by Year 3 or 4 you started generating distributions annually (even if small at first), instead of a single big payout in Year 10. Consistent cadence can signal a well-oiled process and a portfolio with multiple sources of liquidity.
  
  
• Time-to-Cash (TTC): This is the average time from investment to distribution for your exits so far, aka DPI velocity. LPs care about time-to-cash because of the time value of money. Simply put, a dollar returned early is worth more than a dollar returned late. You can calculate this as a % of invested capital returned within 5 years. For example, if your Fund I returned money to investors by year 3, that’s a strong signal. Industry data shows many early-stage funds don’t reach meaningful DPI until year 8–10, so any acceleration is a differentiator. Time-to-cash discipline also forces you to constantly assess whether any investments could be candidates for early exit or secondary if the opportunity arises.
  
  
• Recycled Capital Percentage: Recycling refers to reinvesting early distributions into new deals (rather than paying them out) to maximise total value. It’s a double-edged sword for DPI: recycling can reduce short-term DPI (since you’re not distributing that cash), but ideally increases final DPI by making new investments. LPs will want to know how you balance this. Track the percentage of gains or capital that you recycle and be prepared to explain your rationale. Being transparent here is key. If your DPI looks lower because you recycled aggressively, point that out and perhaps show an adjusted DPI figure had you not recycled. Many experienced LPs actually favour some recycling, as long as it’s within agreed limits and the reinvestments are performing. Consider including a KPI that shows DPI plus remaining NAV relative to paid-in, both with and without recycled capital, to isolate the effect.
  
  
• DPI/TVPI Composition: Although LPs have recently prioritised DPI, they still care about total return. A useful dashboard metric is the ratio of DPI to TVPI. Early in a fund’s life, this will be low, but you want to see it increase over time. If your DPI/TVPI is higher than peer funds of the same vintage, that’s a strong signal. You can also express this as % of total value realised. Tracking DPI vs TVPI over time will help you meet your milestones and communicate progress.

Conclusion

By maintaining a liquidity dashboard with metrics like the above, you show that you are not merely talking about DPI, you are optimising for it. Share relevant highlights in LP updates and due diligence sessions, like year-on-year DPI increases, industry comparisons and recycle rates. These will ultimately resonate with investment committees and convey that you treat liquidity management as a discipline, not an afterthought.