Limited partners
How can an LP examine the timing assumptions behind IRR at a first-time venture manager?
a first-time venture manager: IRR depends on cash-flow timing as well as amounts.
IRR depends on cash-flow timing as well as amounts. A single percentage does not show how much capital was invested, returned, or remains valued. Confirm the methodology and whether financing arrangements affect the timing presented to investors.
Start with the decision
Inspect dated cash flows and reconcile them with multiples and fund reports. Use a qualified performance specialist for an actual IRR calculation, especially when there are complex flows or multiple mathematical solutions. Do not substitute a simple annualized return for IRR.
The illustrative scenario
This is an educational workbook. The company or fund and all numerical inputs below are fictional. They are not ADIN results, customer claims, market benchmarks, or a forecast.
The fictional manager is raising a first independent fund after working on investments at another firm. The pitch includes several prior deals, but the LP has not yet verified the manager's role or permission to use those examples.
A prior employer's portfolio is not automatically an attributable personal track record. Separate sourcing, analysis, investment authority, board work, and realized outcomes for each deal.
Separate distributed cash from remaining value
Use a single fictional reporting date and a simplified common denominator of $10,000,000.00 paid in. Cash distributions are $2,000,000.00 and the assumed remaining value is $13,000,000.00. These invented values are not ADIN performance, peer benchmarks, or a return forecast.
Under those definitions, the total multiple is the sum of the distributed and remaining-value multiples. A revision to remaining value changes RVPI and TVPI without changing the cash already distributed. Ask whether a real report uses gross or net figures, what fees and carry are included, and how adjustments or recycling affect its definitions.
This table does not calculate IRR: there are no dated cash flows from which to do so. Identical multiples can coexist with different timing and different uncertainty. Compare the proposed independent fund's work with the manager's actual prior responsibilities. Explain where the new role requires capabilities not shown by the old one. Reconcile actual metrics to the applicable reports and methodology with the relevant accounting or performance specialist.
| Item | Illustration |
|---|---|
| Fictional paid-in capital | $10,000,000.00 |
| Fictional distributions | $2,000,000.00 |
| Assumed remaining value | $13,000,000.00 |
| DPI: distributions / paid-in | 0.20× |
| RVPI: remaining value / paid-in | 1.30× |
| TVPI: total value / paid-in | 1.50× |
Use this worksheet
Answer the questions with a source, date, owner, and next action. Mark an unknown as unknown. Use public or permissioned information and involve a qualified specialist when a question requires expertise beyond the team’s competence.
- Which cash flows are included?
- What dates are used?
- Is performance gross or net?
- How are facilities treated?
- What do the multiples show alongside IRR?
Questions specific to this scenario
- Which decisions were actually theirs?
- Who can verify the attribution?
- What is missing from the independent operating plan?
Request a role-by-deal table, permissioned references, dated evidence of decisions, and clear realized versus unrealized figures. Keep unavailable evidence visible instead of filling gaps with estimates.
A concrete next test
Choose one successful prior investment and one unsuccessful example from the relevant set. Ask the manager to specify their role and obtain permissioned corroboration. Compare the work shown with the responsibilities they would hold in an independent fund, including decisions not previously theirs.
Interpret the result
Two IRRs can summarize very different cash-flow experiences. The practical question is what the number includes and how it relates to distributions and remaining value, rather than treating one percentage as a complete ranking.
Compare the proposed independent fund's work with the manager's actual prior responsibilities. Explain where the new role requires capabilities not shown by the old one.
Sources and method
These primary resources provide background for the concepts. The fictional scenario, calculations, and worksheet are ADIN educational examples; the sources do not report or validate those invented results. Reviewed October 11, 2026.