Your investor is measured on one number above almost all others: how much cash they have actually handed back to the people whose money they invest. Not the paper value of what they still hold, but the cash they have wired back, set against the money those people put in. That number is DPI, distributions to paid-in, and once you see that it is your investor’s report card, half of what they do stops looking irrational.
This sits beside a piece we published on fund size. Fund size tells you which exit your investor’s arithmetic needs. This is a different clock. DPI tells you which quarter they need cash in, and why a warm, patient backer can turn impatient without your business changing at all.
Two numbers describe a fund. TVPI, total value to paid-in, counts everything the fund is worth: the cash it has returned plus the paper value of what it still holds.1 DPI counts only the cash that has left the fund and reached investors. The gap between them is unrealised marks, and the assumptions behind those marks have caused arguments in the research for years.2 A markup is a price someone typed. A distribution is money that left the building.
For a decade a rising TVPI was enough. Marks went up, the next fund raised itself, everyone was content. That era closed. Exit windows narrowed, cash stopped coming back, and the industry’s own investors, the pension funds and endowments known as limited partners, started asking a blunter question. The question stopped being what the fund is worth on paper and became how much cash it has actually sent back. Their trade body rewrote its reporting standards in 2025 to make that cash trail easier to read.3
So your investor now needs realised cash, on a clock, to prove they are good at their job. In a market where exits are rare and small, that need lands on you.
Why three lenses on one number
DPI pressure looks like one thing: an investor who suddenly wants liquidity. It is really three forces, and a founder who sees only one misreads the other two. So I route this to three models with different failure modes, spanning three ways an outcome takes shape.
The first is an equilibrium lens: signaling. It explains why a paper markup and a cash distribution are not the same message, and why your investor is now forced to send the expensive one. The second is a contagion lens, shaped like an epidemic curve: it explains why the pressure spreads across the whole market at once and how to tell where your specific investor sits on that curve. The third is a luck-skill lens: it explains how much of your investor’s DPI problem is a bad draw on the exit calendar rather than a verdict on you, which decides how much you should concede to fix it.
Two models that would usually earn a card here I have folded in instead. The relationship between a fund manager and their own investors is a principal-agent problem, the manager acting on behalf of people who cannot watch every move. That tension lives inside the signaling card, because the markup is precisely the agent’s cheap self-report. And cheap talk, the idea that a costless message carries no weight, is the same card read from the other side. Neither earns its own lens. Both would spend words the argument needs.
The framework: three forces under one number
1. The signal lens: a markup is cheap, a distribution is expensive
A signal only means something when it costs something to send. Anyone can claim to be a strong fund. The claim is free, so nobody believes the claim. What separates a good manager from a lucky one is an action the weak manager cannot afford to copy.
A markup fails that test. A number in a quarterly report costs nothing to type. It rests on the last round’s price and on the value of holdings nobody has sold, and those residual values are exactly the soft part of the calculation.2 A distribution passes the test. To distribute, a manager has to turn an illiquid holding into real cash and wire it out, which they can only do by producing a genuine exit or selling their position to someone else. It cannot be faked, and it drains the fund of an asset. That is the whole point. The expense is what makes it believed.
Once limited partners learned to discount the cheap signal and reward the expensive one, your investor’s incentives flipped. A high paper mark on your company used to be enough for them. Now they need the cash event, because the cash event is the only signal their own investors still trust. Read the markup for what it is: the cheap message. The distribution is the one being demanded of you, because it is the one that counts.
Assumes limited partners cannot verify a manager’s skill directly, so they price the signal they can see, and a costly action separates the strong manager from the lucky one.
Fits because a markup is self-assigned and free, while a distribution burns a real, illiquid asset to produce cash that arrives in an account.
Breaks when the manager can still raise the next fund on marks alone, in a hot market or on a marquee brand, so the cheap signal keeps working and the pressure on you disappears.
Counteracts the instinct to read a rich markup as validation. The mark is the cheap message, not the credible one.
May reinforce managers pushing companies into premature exits or forced secondaries purely to manufacture a DPI figure.
2. The contagion lens: the pressure spreads, and you can locate your investor on the curve
DPI pressure is not a private mood. It moves through the market like an infection. When a run of funds returns little cash, the limited partners who backed them freeze, because their private-market holdings now sit too large against everything else they own, and they stop committing to new funds. That freeze passes from one investor to the next through the shared base of pension funds and endowments they all draw on, and it lands back on every manager trying to raise into it.5
Model it as three states. Susceptible: a manager with dry powder and years left, not yet under pressure. Infected: a manager mid-life, raising the next fund now, desperate for a DPI number to show. Recovered: a manager who already returned cash or already closed the next fund, and can wait again. Your investor’s impatience is usually not about you. It is the infection reaching their part of the market.
This is the lens that turns knowledge into timing. Work out which state your investor is in. A general partner actively raising their next fund is at peak infection and will value a small, showable distribution far above its size. One who just held a final close has recovered and can give you room. The same request lands completely differently depending on where on the curve the person sits.
Assumes pressure transmits through a connected population of investors rather than arising independently at each fund, following a susceptible-infected-recovered path.
Fits because limited-partner sentiment and re-commitment behaviour are correlated and travel through shared allocators, so one starved set of funds infects fundraising broadly.
Breaks when the pressure is genuinely specific to you, because you missed plan badly, rather than transmitted from the wider market.
Counteracts the founder who personalises the urgency and reads a market-wide freeze as a private judgement on their company.
May reinforce a stampede, where every manager demands liquidity at once and crushes the price of the secondary sales they are all forced into.
3. The luck-skill lens: most of the DPI gap is the calendar, not you
Over a short window, a fund’s DPI is mostly luck. Whether cash has come back by year five depends on when the manager could deploy and whether an exit window happened to be open when their companies matured. Fund returns swing hard by vintage year, the year the fund started investing, for reasons no manager controls.2 Skill shows up over many funds and many years. A single fund’s DPI at a single moment is close to a coin the calendar flipped.
This matters because of what you might give up to fix it. If your investor is leaning on you to take an early exit, accept a punitive secondary discount, or bless a down round, ask how much of their DPI shortfall is a bad calendar draw versus a real problem with the companies they backed. A bad draw is not yours to pay for. You should not destroy value in your company to smooth a number that a different exit window would have smoothed on its own.
The reverse also holds. If the shortfall is genuine, if the portfolio is weak and the DPI gap is skill rather than timing, the pressure will not lift, and you are better off knowing that early. Separate the two before you concede anything. Price only the part that is about you.
Assumes short-horizon fund outcomes are dominated by variance, so timing swamps skill until many draws accumulate.
Fits because exit-window timing is largely outside any single company’s control, and returns disperse widely by vintage year.
Breaks when the shortfall really is selection, a portfolio of weak companies, in which case the urgency reflects a problem you are being asked to subsidise.
Counteracts the founder who reads the manager’s urgency as evidence that their own company is failing.
May reinforce fatalism. The luck frame can excuse a manager who genuinely picked badly, so do not over-apply it.
GEER: the reads that cost you nothing
Before you concede anything, spend an afternoon reading your investor the way they read you. Every move here is free and commits you to nothing.
- Find the fund’s vintage and its number. Both are usually in the close announcement or on the firm’s own page. Vintage plus a roughly ten-year life tells you where they sit on the DPI clock, and whether they are early enough to wait or late enough to need cash now.8
- Ask when they next raise. One line does it: when do you expect to be back in market for your next fund. A manager raising inside twelve months is at peak infection and needs a distribution they can print in a deck. A manager who just closed can give you room. Their answer sets the whole negotiation.
- Separate their marks from their cash. Ask, plainly, what their realised DPI is on the fund you are in, not the TVPI. A wide gap between the two means they are carrying paper they cannot yet turn into the signal their investors want, which is the pressure you are feeling, translated.
- Name the calendar. African exits are thin and slow. Fewer than a hundred were even trackable across the continent over a recent multi-year stretch, most of them modest trade sales, and the data around them stays scarce.7 That thin calendar, not your performance, is why realised cash is hard to produce here. Say so, out loud, in the room.
RADAR: what to line up before the next round closes
This decision has two seats. The founder reading the pressure, and the manager living under it. Sequence each portfolio by how reversible the move is: do the cheap, dominant things now, buy cheap insurance against the tail, and pre-commit the irreversible moves to a trigger you name in advance.
If you are the founder.
- Do now (T+3 to T+14). Offer a distribution, not a discount. If you are profitable, a modest dividend to the cap table is real DPI your investor can show, and it costs you far less than a rushed exit. If you are not, propose a small partial secondary in your next round, a slice of early-investor stock sold to the incoming lead. It hands your investor a printable cash event without you selling the company. Offer them a distribution they can show, not an outcome you cannot undo.
- Hedge (by T+14). Keep one relationship warm with a longer-clock backer, a DFI, a family office, an evergreen fund, whose own DPI pressure is milder. If your current investor’s infection worsens, that is the door that stays open. Cheap insurance against a squeeze you cannot control.
- Defer and trigger (T+28 and beyond). Do not agree to a value-destroying exit to solve a number that is mostly calendar luck. Pre-commit the trigger instead: the first time you are pushed toward a sale below what the business is worth, you put the DPI question on the table in writing, and separate the part of their shortfall that is yours to help with from the part that is theirs to carry. Have that conversation then, not in the panic of a closing quarter.
If you are the general partner.
- Do now (T+3 to T+14). Tell your best companies where you sit on the clock, honestly, rather than transmitting the pressure as vague urgency. A founder who understands you need a distribution by a date can often engineer a small one that costs their business little. Urgency with no reason attached just corrodes the relationship and teaches them to discount you.
- Hedge (by T+28). Build the liquidity toolkit before you need it. A continuation vehicle or a GP-led secondary lets you return cash to investors who want out while holding the assets you believe in, and that market has grown to record size, more than half of it now these manager-led deals.4 Set it up when you are calm, not when a fundraise is on fire.
- Defer and trigger (ongoing). Do not force a company into a bad exit to manufacture a number. The trigger to watch: the moment you catch yourself pushing a sale that helps your DPI more than it helps the company, stop and price what it does to your reputation with the founders you will need for your next fund. A manufactured distribution today can cost you the deal flow that fills the fund after this one.
CHAIN: what usually happens when the DPI clock is ignored
Take the cases that rhyme with yours in structure, not in sector: a solid company held by a fund that is running low on realised cash and high on paper marks, with a fundraise coming. The sequence repeats. Early years feel aligned, because everyone is building. Then the manager’s own clock tightens. The marks look healthy, but the cash has not come back, and a distribution is suddenly worth more to them than another year of growth is to you. The nudge arrives: take the offer, run the secondary, accept the terms. It reads as a verdict on your company. It is usually the manager’s scoreboard, not yours.5
The base rate is set by a thin exit market. On the continent, liquidity is rare and mostly arrives as modest acquisition, the occasional Paystack, not as a steady stream of large outcomes.7, 6 So the odds that your investor can produce DPI cleanly, without leaning on you, are already low, and lower still late in a fund’s life.
Adjust for your present state. A DFI-anchored or evergreen backer feels this far less, because their mandate does not live or die on a single fund’s DPI. A late-vintage commercial fund feels it far more. And subtract the counterfactual before you blame the fund for everything: some founders pushed toward an exit would have sold anyway, or should have. Count only the value the DPI clock itself destroyed, where a good company was pressured into a bad outcome purely to move a number.
Matrix-break flag. The scoreboard is tightening even as the exits stay thin. Reported exits and headline listings can rise, as they did in a recent strong year, and still leave most funds without cash, because a rising mark is not a distribution and many of those listings priced below their last private round.5 African fundraising and deal activity have been recovering off a low base, but exits lag both.6 Read that gap carefully: when marks recover faster than cash, DPI pressure gets worse, not better, and it will keep arriving at your door.
What this reading cannot tell you
These three lenses explain the pressure. They are silent on one thing that decides everything: whether your particular investor is honest about where they sit. A manager under DPI strain has every reason to dress private urgency as strategic advice, to tell you the market wants an exit when it is their fund calendar that wants one. The signaling lens says the incentive to do this exists. It cannot tell you whether the person across the table is acting on it. No model reads intent.
It is also blind to the rare case where the pressure is right for you too, where the offer your investor is pushing genuinely is the best outcome your company will see, and the alignment is real rather than convenient.
So here is the move that survives not knowing. Before your next round closes, put one number in front of your investor and ask them to react to it: your best honest realised value, on your real calendar, not their preferred one. The pressure is not a verdict on your company. It is a scoreboard on your investor. Make them tell you which number they are actually solving for. Then decide what small, real distribution you can offer that moves their scoreboard without mortgaging your business, and offer exactly that, and nothing more.
Sources and notes
- AngelList Education Center, “What to Know About TVPI.” Verified: body states that investors use TVPI, total value to paid-in capital, to gauge fund performance, includes a “TVPI vs. DPI (and RVPI)” section, and notes that TVPI is simpler than other metrics but ignores the time value of money. angellist.com/learn/tvpi
- Harris, Jenkinson and Kaplan, “Private Equity Performance: What Do We Know?” NBER Working Paper 17874. Verified: body states that a fund multiple’s numerator is the sum of all distributions and the value of unrealised investments (residual value), that assumptions about residual value “have created controversy in the literature,” and that average buyout performance relative to public markets varies across vintage years. nber.org (w17874)
- Institutional Limited Partners Association, “Quarterly Reporting Standards.” Verified: body states that the updated ILPA Reporting Template and the new ILPA Performance Template were developed through an industry effort and released in 2025 to supplement the quarterly reporting provided by general partners to limited partners. ilpa.org/quarterly-reporting-standards
- Wikipedia, “Private equity secondary market.” Verified: body states that in GP-led secondaries a fund’s general partner leads a process to provide liquidity to existing investors by selling assets into a new vehicle (including continuation funds), that global secondary transaction volume reached a record of roughly US$160 billion in 2024, and that GP-led secondaries have grown to upwards of 50% of the market in the 2020s. en.wikipedia.org/wiki/Private_equity_secondary_market
- SVB, “State of the Markets Report” (H1 2026). Verified: body states that the uptick in exits in 2025 “seems to have lined the coffers of growth funds, but not most VC funds,” that 2025 was the best year for US venture-backed tech IPOs since 2021 but only half of those companies were above their last private valuation and fewer than a third above their initial IPO market value, and that a lukewarm public reception may push some startups to wait before pursuing IPO liquidity. svb.com/trends-insights/reports/state-of-the-markets-report
- African Private Capital Association (AVCA), Research and Publications. Verified: body states that the 2024 African Private Capital Activity Report shows fundraising more than doubled to US$4.0bn (the third-highest final close value on the continent in the last decade) with exit activity up 47% year over year, and that Q1 2026 activity shows a landscape “transitioning,” with +17% in deal volume and +4% in exits year over year. avca.africa/data-intelligence/research-publications
- Africa: The Big Deal, “Anatomy of an exit.” Verified: body states that between 2020 and late October 2022 the tracker was able to identify only about 100 exits across the continent, that these are mostly acquisitions (Stripe buying Paystack for US$200m in 2020 among them), that 79% involved startups headquartered in one of the “Big Four,” and that there is “a dearth of information about them.” thebigdeal.substack.com/p/anatomy-of-an-exit
- Wikipedia, “Venture capital.” Verified: body states that venture capitalists seek a return through an eventual exit event such as an IPO, a merger, a sale to a financial buyer in the private equity secondary market, or a sale to a trading company, and that funds operate on a horizon of roughly eight to twelve years. en.wikipedia.org/wiki/Venture_capital