Realization Multiple (DPI): Definition, Formula, and Uses

What it is

The realization multiple—also called distributed to paid-in capital (DPI)—measures how much cash a private equity or venture capital fund has returned to investors relative to the capital investors have paid in. It captures realized, distributed returns rather than paper or unrealized gains.

Formula

Realization Multiple (DPI) = Cumulative Distributions ÷ Paid‑in Capital (PIC)

Interpretation

• DPI > 1.0: the fund has returned more cash than investors contributed.
• DPI = 1.0: investors have received back exactly their contributed capital.
• DPI < 1.0: investors have received less cash back than was paid in.

Why it matters

• Focuses on actual cash returned, removing valuation subjectivity tied to illiquid holdings.
• Useful for spotting funds that consistently distribute proceeds to investors.
• Commonly used by private equity and venture capital investors as a straightforward measure of realized performance.

How it works

• Each time a fund makes a distribution (cash or stock returned to investors), cumulative distributions increase and DPI rises.
• Because DPI only counts realized distributions, it ignores any remaining portfolio value that has not yet been realized through exits.

Relation to other metrics

Realization multiple is one component of a broader performance picture:
* TVPI (Total Value to Paid‑In) = (Cumulative Distributions + Residual Value) ÷ PIC — captures both realized and unrealized value.
RVPI (Residual Value to Paid‑In) = Residual Value ÷ PIC — measures unrealized value remaining in the portfolio.
IRR (Internal Rate of Return) — accounts for timing of cash flows and the time value of money, which DPI does not.

Limitations

• Ignores the time value of money and inflation—DPI is a nominal multiple, not a rate of return.
• Does not reflect unrealized value remaining in the portfolio; a low DPI may coexist with strong unrealized (but undistributed) gains.
• Past distributions do not guarantee future exits or distributions; subsequent market or financing shifts can change outcomes.

Example

If a fund has received $50 million in paid‑in capital and has distributed $70 million to investors, its DPI is:
DPI = $70M ÷ $50M = 1.4
This means the fund has returned 1.4 times the capital paid in.

Practical use

Investors typically use DPI alongside TVPI, RVPI, and IRR to assess both realized returns and remaining portfolio potential. DPI is particularly valuable when comparing funds’ track records of returning cash to investors without relying on subjective valuations.

Conclusion

The realization multiple (DPI) is a simple, tangible metric for understanding how much cash a private equity or VC fund has actually returned to investors. It should be used together with measures that capture unrealized value and timing (TVPI, RVPI, IRR) to form a complete view of fund performance.