MOIC vs IRR: Which Number to Trust on an Angel or LP Statement

On an angel update or an LP capital account, MOIC vs IRR is the wrong fight. Multiple on invested capital (MOIC) answers how many dollars came back — or are still marked — for each dollar you put in. Internal rate of return (IRR) annualizes the same cash flows, so a fast exit and a slow one print different percentages. Wall Street Prep treats the two as complementary, not substitutes: MOIC is the absolute multiple; IRR is the annualized yield. Trust neither number alone, and add DPI so a high IRR from an early distribution does not hide a thin multiple.

What MOIC measures

Wall Street Prep defines MOIC as the value of an investment on the exit date compared with the initial equity contribution. The deal-level formula is total cash inflows divided by total cash outflows. On a live book the same idea is often written as realized value plus unrealized value, divided by capital invested. A 4.0x MOIC means each $1.00 of cost is now $4.00 of value — cash, a mark, or both. Wall Street Prep also treats “multiple on money” (MoM) as the same ratio.

MOIC does not care whether the exit took two years or eight, and it does not say how much of the multiple is cash. Unrealized MOIC still includes unsold positions; realized MOIC counts only locked-in proceeds. On a founder update the “MOIC” line is often mark over cost. On an LP pack the fund-level cousin is usually total value to paid-in capital (TVPI). Before you compare two PDFs, check the denominator (invested capital versus paid-in, which can include fee calls) and whether residual NAV sits in the numerator.

What IRR measures

Wall Street Prep defines IRR as the annualized rate at which the initial capital must have grown to reach the ending value — equivalently, the discount rate that sets net present value of the cash flows to zero. The inputs are the size of each inflow or outflow and the date it hit. That is why an IRR calculator that only sees annual buckets will disagree with one that uses the actual wire dates. Wall Street Prep prefers Excel XIRR over IRR because private-market cash is irregular.

Preqin notes that closed-end private funds are typically assessed with IRR, a money-weighted rate, while time-weighted return is the usual tool for open-end and public-market products. If both books print “IRR,” they are answering what these dated cash flows earned, not a public-market time-weighted score.

Why the two numbers disagree

MOIC measures how much you made. IRR measures how fast. Wall Street Prep’s own warning is the one that shows up on statements: a 30% IRR with a 1.5x MOIC can look excellent until you notice the multiple. The percentage is mostly a quick return of capital, not a large gain. The same page notes that a dividend recapitalization soon after close lifts IRR even when the money multiple has barely moved; longer holds compress the annualized rate even when the multiple is fine.

For interview math — not as a forecast or an industry average — Wall Street Prep approximates 2.0x MOIC in 3 years at ~25% IRR (~15% over 5 years), 2.5x at ~35% (~20% over 5 years), and 3.0x at ~45% (~25% over 5 years). Same multiple, different clock. Run the same dated flows through a MOIC calculator and the IRR tool before you accept a GP’s headline.

Add DPI so a high IRR does not hide a thin multiple

DPI — distributions to paid-in capital — is the cash slice of the multiple. Preqin defines it as distributions received divided by capital called (paid-in). Residual value to paid-in (RVPI) is remaining NAV over the same denominator. TVPI is DPI plus RVPI. A high IRR with a low DPI means the clock was flattered by an early distribution, a subscription line, or a mark; most of the “return” is still paper or recycled cash.

Illustration, not a benchmark: $100,000 called, $40,000 distributed in year one, leftover NAV still at cost. DPI is 0.4x. TVPI/MOIC is about 1.0x. IRR can still print as a large number because cash came back fast. That statement looks hot in a quarterly email and thin in a liquidity plan.

ILPA built the same split into 2026 reporting. Its Performance Template is meant for funds that commence operations on or after January 1, 2026. It standardizes fund- and portfolio-level IRR and TVPI/MOIC, including figures with and without fund-level subscription facilities, so those methodologies can be compared. A 2026-vintage pack that prints one IRR and one multiple with no “ex-facility” column is missing the pair ILPA asked GPs to show.

Which number to trust

Trust the pair, then the cash. Use MOIC (or TVPI on a fund) for magnitude, IRR for pace, and DPI for how much of that magnitude is already in your account. A strong IRR with a thin DPI is a timing story. A strong MOIC with a modest IRR is a long hold that still made money. A strong pair with DPI near zero is a mark. None of those is “wrong”; each one without the others is incomplete.

For a single angel check the same three questions apply, even when the PDF is a founder update: what did I pay, on what date; what cash has come back; what is still a mark. Do not overwrite the original cost when a SAFE converts or a follow-on closes — keep the cash history, or both calculators will lie. The same discipline is what Raziel’s capital-call tracking guide is for on the LP side: one dated line per wire.

Raziel’s site asks investors to track MOIC and IRR in one place, and the public tools cover the math. The honest input is still a cash-flow ledger with dates, not a single “current value” cell. Report both numbers, then look at DPI before you congratulate a high IRR.