Your VC May Prefer a $150 Million Exit to Your Next $100 Million Round. Here's Why.

Venture capital's paper profits aren't necessarily cash returns

According to the PitchBook-NVCA Q3 2026 Venture Monitor, US venture funds raised $108.5 billion through September 2026. Funds of $500 million or more captured 78.1% of that capital.

But the amount of money raised tells us little about how much investors have received back.

Carta's September 2026 fund-performance research revealed a striking gap.

As of June 30, 2026, median distributions to paid-in capital (DPI) by fund vintage were:

• 2017 funds: 0.37x, or 37 cents returned per dollar contributed.
• 2018 funds: 0.15x.
• 2019 funds: 0.04x.

In other words, the median 2019 fund in Carta's sample had distributed only four cents for every dollar its investors contributed.

The numbers reflect funds tracked by Carta, not the entire venture industry. They also do not establish what those funds will ultimately return.

But the liquidity gap is real.

In October, Carta reported more than $104 billion in unrealized value across its sample of more than 2,000 venture funds.

Some of those investments may eventually produce extraordinary returns. Others may exit below their reported valuations.

The point is that a fund can report substantial investment value while returning relatively little capital to the investors financing it.

For founders, this creates an incentive that is easy to overlook.

An investor who appears successful on paper may still need realizations to demonstrate performance and support fundraising for its next fund.

DPI vs. TVPI: Why the distinction matters

Venture funds generally measure performance using several metrics. Two are particularly relevant.

TVPI (Total Value to Paid-In Capital) measures the total reported value of a fund's investments, including distributions already made and the estimated remaining value.

DPI (Distributions to Paid-In Capital) measures capital actually distributed to investors relative to the capital they have contributed.

Consider a hypothetical $100 million fund whose investors have contributed $80 million.

The fund has distributed $12 million and still holds investments valued at $148 million.

The fund reports a 2.0x TVPI.

But its investors have received only 15 cents for every dollar contributed.

The remaining value is based on investments that have not yet been fully realized.

That does not make the valuations meaningless. It means they are not equivalent to cash proceeds.

An acquisition can turn unrealized holdings into cash. The fund can then distribute proceeds to LPs, subject to its obligations and distribution policies.

A primary financing round generally does not produce that liquidity for existing shareholders unless it includes a secondary sale.

Same $150 million acquisition. Two very different investors.

Let's return to our hypothetical cybersecurity company.

Two venture funds are on the cap table.

Fund A invested $5 million in 2019. It owns 12% of the company and made the investment through a $100 million fund established in 2017.

Fund B invested $12 million in 2025. It owns 8% and invested through a $400 million fund established in 2024.

A buyer offers $150 million in cash.

Assume a simplified distribution in which proceeds are allocated proportionally to ownership, without debt, transaction expenses, liquidation preference adjustments, or other shareholder rights.

Fund A could realize $18 million on a $5 million investment.

Fund B would recover its $12 million investment with no gross gain.

The $18 million also represents a much larger share of Fund A's total size.

If Fund A has $100 million in paid-in capital and distributes the entire $18 million, that adds 0.18x to its fund-level DPI.

Fund B receives an amount representing only 3% of its $400 million fund size.

These differences are meaningful.

But they do not, by themselves, prove which investor should prefer the acquisition.

To understand that, we need to compare selling today with the alternative.

The $100 million round: Both investors face the same mathematical hurdle

Suppose the company can raise $100 million at a $400 million pre-money valuation.

The post-money valuation becomes $500 million.

Assume neither existing investor participates, both are diluted by 20%, and no other capitalization changes occur.

Fund A's ownership declines from 12% to 9.6%.

Fund B's declines from 8% to 6.4%.

Now suppose the startup could be acquired for $600 million four years later.

The simplified outcomes would look like this:

Here's the surprising part.

Both investors face exactly the same break-even probability in this simplified scenario.

Assume the future outcome is binary: either the company sells for $600 million in four years or the investment becomes worthless.

Ignoring the time value of money, the required probability of reaching that exit is:

Fund A: $18M / $57.6M = 31.25%

Fund B: $12M / $38.4M = 31.25%

Now introduce an illustrative 25% annual required return for waiting four years.

An investor would require:

$1 today × 1.25⁴ = $2.44 in four years.

The break-even probability therefore rises to approximately 76.3% for both funds.

The 25% rate is a hypothetical investment hurdle, not a claimed industry benchmark. Actual investors may use different return requirements.

The example also excludes intermediate exit values, distributions, follow-on investments, and shareholder preferences.

But it reveals something important.

The company-level calculation does not explain why one fund prefers selling while the other prefers waiting.

Both own the same underlying asset. Both experience the same proportional dilution.

What can separate them is the financial position of the funds holding those shares.

Same math. Different clocks.

Fund A was established in 2017.

By 2026, it is approaching its tenth year.

Its managers may be evaluating fund extensions, preparing distributions, or trying to demonstrate realized performance before raising another fund.

An $18 million realization might be important.

Fund B was established in 2024.

It may have years remaining in its investment period, substantial follow-on reserves, and LPs who expect it to pursue longer-term growth.

An immediate acquisition might produce a disappointing return on an investment made last year.

This creates three differences founders should understand.

1. Liquidity has a different value to each fund

Fund A may place a higher effective value on receiving cash today rather than waiting four more years.

That could reflect LP expectations, fund maturity, or the difficulty of extending the fund's life.

Fund B might be more comfortable waiting.

A fund facing tighter liquidity or timing constraints may effectively demand a higher return for waiting. That raises the probability of success needed to justify rejecting today's acquisition offer, even though both funds own shares in the same company.

Neither preference is automatic. An older fund with substantial liquidity may prefer to hold, while a younger fund facing financial constraints may welcome an exit.

2. Fundraising creates incentives beyond the existing investment

A venture firm's general partners, or GPs, typically raise successive funds from limited partners.

If LPs are increasingly focused on cash distributions, an older fund's DPI can influence the manager's ability to raise its next vehicle.

That affects the management company and potentially the GP's future fee income and business prospects.

This does not mean the GP should prioritize its next fund over obligations owed in connection with an existing portfolio company.

But founders should recognize that the GP's business has financial pressures of its own.

3. Available reserves affect whether investors can support the next round

A fund may believe your company should keep growing but lack available capital for follow-on investments.

Its investment period may have ended. Its reserves may already be allocated elsewhere.

If your next financing requires insider participation, that limitation matters.

A decision not to invest does not necessarily signal lost confidence.

It can reflect fund-level capital constraints.

Before interpreting an investor's decision, understand the reason.

Your investors can disagree. Who actually decides?

Founders sometimes assume that a venture investor who wants to sell can simply force an acquisition.

Others assume the opposite: that management can reject an acquisition regardless of shareholder preferences.

Neither assumption is safe.

The answer depends on the company's governing documents, financing agreements, shareholder approvals, and applicable law.

For a Delaware C-corporation, relevant provisions may include protective provisions, voting agreements, and drag-along rights.

Drag-along provisions are especially important.

Depending on their negotiated terms, these provisions can require minority shareholders, including founders, to support a qualifying company sale once specified approval thresholds are met.

Those thresholds may involve preferred shareholders, common shareholders, and the board. They are not identical across companies.

A majority of preferred shareholders does not necessarily have the unilateral power to compel a sale.

And directors' fiduciary duties remain relevant to the transaction process.

For Israeli founders operating through US corporations, this is a reason to review the signed agreements before acquisition discussions become serious.

The cap table shows who owns the company.

It does not, by itself, show who can approve, block, or trigger obligations in a sale.

Your investors have a fund strategy. You need a company strategy.

Venture funds and the companies they invest in do not always operate on the same timelines.

That does not make investors adversaries.

It means founders need to understand the incentives influencing the decisions around their board table.

The goal is not to guess which investor wants an early exit.

It is to make sure the company evaluates an acquisition or financing based on its actual financial alternatives, while recognizing the interests and rights of the shareholders involved.

Andrew helps founders keep financial records, fundraising information, and cap table data organized.

When the decision involves a major financing, dilution, or acquisition, Andrew Financial provides fractional CFO advice to help founders evaluate the economics and trade-offs.

Because the right question isn't simply whether your startup can become a $600 million company.

It's whether the additional capital, risk, and years required to get there justify passing on $150 million today.