Following SSTI’s recent look at the timing and type of exits, we continue our look at investment activity to characterize returns on investments so that TBED investors can more accurately project and adjust program parameters to support long-term sustainability. Accurate data on venture capital investment returns and fund performance on private investment vehicles is not readily or consistently available. Anecdotal stories and the occasional press release on a major transaction exist, but VC exits are often done quietly. As such, parties interested in understanding performance outcomes must rely on focused reports and other aggregate data.
One of the fundamental challenges of measuring venture performance is that funds take years to deploy and a decade or more to mature. Funds also characteristically exhibit a “J curve” return profile, showing early losses before successful investments mature. These constraints can test the patience of TBED board members andprogram stakeholders unfamiliar with the nature of venture markets.
Another important aspect of venture returns is how much higher returns are for top-performing funds. Carta’s VC Fund Performance, Q4 2025 report finds that funds at the 90th percentile have significantly higher returns than even those at the 75th percentile, while those at the median and 25th percentile are relatively close in performance. The report attributes this distribution to the rare 100x-or-larger exit driving top-end fund performance. While not a surprising revelation, the data drives home how important it is for fund managers to hit home runs. While TBED investors have economic benefits as a central measure of success, generating some outsized returns is still critical to making the financial numbers work with a venture portfolio.
Internal Rate of Return (IRR) is one of the standard ways to measure investment performance, yet it presents various challenges for understanding venture funds. As a rate, the time component of IRR causes fund performance to decline after an initial peak from early exits. Looking at 2017 vintage funds, Carta’s data shows a 50th percentile Internal Rate of Return (IRR) of 11.6% and a 75th percentile of 18.6%. The benchmark report published by PitchBook provides another look at fund performance and shows a Median IRR between 14.5% and 16.2% for 2015-2017 vintage funds. From a TBED perspective, using 10% as a benchmark IRR for modeling mature funds and setting stakeholder expectations is a reasonable, if conservative, approach, particularly if investment strategies are prioritized by service area, industry sector, or other impact considerations.
Total Value of Paid-In Capital (TVPI) is a common measure of venture fund performance that expresses portfolio value as a multiple and sidesteps the timing challenges of IRR. Importantly, TVPRI is not the same thing as cash returns, particularly with recent funds that do not yet have exits. Carta’s analysis shows a median TVPRI of 1.89x for 2017 vintage funds. Funds performing at the 75th percentile for 2017 and 2018 are just over 2.5x. PitchBook’s data show median TVPI above 2x from 2011 through 2017 vintage funds and reinforce using 2x as a reasonable target.
In good news for TBED investors, evaluating performance by fund size shows that small funds can deliver strong performance. While there is year-to-year volatility, the Carta report shows that TVPI for funds below $10 million is competitive with larger funds, and top-performing small funds can exceed 5x and provide the highest appreciation within vintage year cohorts. While small funds are no guarantee of success, at the very least, there does not appear to be an inherent TVPI or IRR penalty associated with them.
While funds can be raised based on TVPI, companies with high valuations can still fail. Distribution of Paid-In Capital (DPI) most accurately reflects what has been returned to investors and what would be reinvested in an evergreen model. Returning cash to investors takes time, and Carta’s data shows that top-tier 2018 vintage funds are just now returning above 1x to investors. To put the timing of returns in perspective, 50th-percentile 2017 funds have returned only .34x to investors. PitchBook’s report shows median DPI from 2005 through 2014 ranges from 1.06x to 1.84x. Funds performing in the top quartile range from 1.71x to 3.06x over the same period. As a blended look, setting DPI expectations of 1.5x is reasonable, though this could be boosted if a TBED fund reinvests what would otherwise go to management fees.
With SSTI’s look at fund returns and exit timing, it is clear that the idea of venture exits generating 3x return in five years is ambitious at best. Successful TBED leaders understand that setting realistic expectations is critical to sustaining long-term stakeholder support, particularly when investment holding periods exceed election cycles. It is also important for TBED investors to calibrate outcomes against the market as a management tool. With these factors in mind, a more realistic expectation for an average fund is 1.5x return over 8 years. Returns for 50% of funds will be higher, so there is a lot of opportunity for TBED managers to optimize their approach and provide higher returns.
Please contact us if you have investment data to share or questions about evaluating investment performance. We also invite you to join our TBED Community of Practice to discuss the emerging models, trends, and practices in TBED and to participate in conversations with experts in the field who are innovating and making an impact.