What Is MOIC?
Multiple on invested capital measures how many times over an investment has returned its cost. The formula is total value divided by invested capital, where total value includes cash already distributed plus the current value of what is still held. An investment that cost $100 million and is now worth $250 million, combining proceeds and remaining stake, carries a 2.5x MOIC.
MOIC is usually quoted gross at the deal level, before management fees and carried interest, which distinguishes it from fund-level multiples like TVPI that are computed net to limited partners on paid-in capital. In practice, a strong buyout deal targets roughly 2.0x to 3.0x over a three-to-five-year hold, while venture investments aim for far higher multiples on their winners.
MOIC vs. IRR
MOIC ignores time, which is both its strength and its weakness. A 2.0x return earned in three years and a 2.0x earned in eight years look identical on a multiple basis, yet the first equates to roughly a 26% IRR and the second to only about 9%. That is why private equity professionals always evaluate the two metrics together: MOIC shows the magnitude of value creation while IRR shows its speed.
The time-insensitivity of MOIC also makes it harder to manipulate. IRR can be flattered by subscription credit lines that delay capital calls or by quick partial exits, but the multiple only improves when genuine value is created relative to dollars invested. Many LPs therefore anchor on multiples when comparing managers, treating IRR as a secondary lens on timing.
Why It Matters
MOIC is the language of deal evaluation inside private equity firms. Investment committee memos frame expected outcomes as multiples, and LBO models solve for the exit assumptions needed to reach a target such as 2.5x. Carry economics for the deal team also scale directly with the multiple achieved, so when professionals say a deal returned three times their money, MOIC is the figure they mean.
In interviews, expect paper LBO questions that ask you to compute MOIC quickly: if a sponsor invests $400 million of equity and exits for $1.2 billion of equity value five years later, that is a 3.0x MOIC and roughly a 25% IRR. Knowing the standard multiple-to-IRR pairings, such as 2.0x over five years equating to about 15%, is a hallmark of a well-prepared candidate.
