You must have heard it somewhere — in a podcast, a pitch deck, or a Shark Tank episode. A founder stands up and says: “We gave our investors 6x returns.”
Or a VC proudly flaunts:
“Our portfolio delivered 5.5x MOIC across exits.”
Now pause for a moment.
That “6x” sounds impressive, right? But let me ask you —
Would you still be impressed if I told you it took 17 years to get that return? Or that it wasn’t even real cash, just a theoretical paper value?
Welcome to the world of MOIC — Multiple on Invested Capital — a metric that looks simple, but often hides more than it reveals.
Let’s unpack what it really means, how it’s used, and more importantly, how to not get fooled by it.
First Things First – What is MOIC?
Let’s start with the basics.
MOIC simply tells you how many times your money has grown over the original amount invested.
If you put ₹1 crore into a business, and after some years you get ₹5 crore back, your MOIC is 5x.
Sounds straightforward, and it is.
But here’s the catch — MOIC doesn’t care how long it took you to get that return.
Whether that 5x happened in 2 years or 20 years — the MOIC remains the same. And that’s where it starts to break as a true measure of performance.
Why Time Is the Missing Piece
As an equity analyst, I always say this:
“A great return delayed is often worse than a moderate return accelerated.”
Let me explain.
Imagine two investments:
– Investment A: ₹2 Cr turns into ₹10 Cr in 10 years
– Investment B: ₹1 Cr turns into ₹4 Cr in 3 years
On paper, Investment A has a higher MOIC (5x vs 4x).
But Investor B gets their capital back faster — and can reinvest it again and again.
In finance, we call this the velocity of capital — how quickly money moves and compounds. And MOIC completely ignores this.
So when someone says, “We made 6x,” always ask:
“Great. Over how many years?”
Because money made slowly is not the same as money made smartly.
The IRR Counterbalance – Where MOIC Falls Short
This is where IRR (Internal Rate of Return) comes in.
While MOIC tells you how much, IRR tells you how fast. It incorporates time, the shape of cash flows, and when exactly those returns were realized.
For example:
– If you earn 2x MOIC in 2 years, your IRR is roughly 41%
– But 2x in 5 years? Your IRR drops to about 15%
That’s a massive difference.
Especially in PE/VC investing, where capital is locked for years — time isn’t just a variable, it’s the costliest resource.
So as a serious investor, I never look at MOIC in isolation.
I always pair it with IRR — because one tells me the size, the other tells me the quality.
Why Everyone Still Flaunts MOIC Anyway
Let’s be honest: MOIC sounds better.
Telling an LP (limited partner) that you returned 4.3x sounds far more exciting than saying “our IRR is 17%.”
It’s cleaner. Simpler. Sexier.
That’s why VCs, PEs, startup founders — they love using MOIC in pitch decks and interviews. It helps paint a picture of massive returns, even if the timeline was painfully long.
And in some cases, it gets worse — they present unrealized MOIC.
That means the money hasn’t even come back yet — it’s just based on a high paper valuation. And in markets where valuations fluctuate wildly, that 6x could become 3x overnight.
When MOIC Becomes a Vanity Metric
Let me show you a classic red flag I’ve seen in early-stage investing.
A fund invests ₹20 crore in a startup at a ₹100 crore valuation.
A year later, the startup raises another round at a ₹500 crore valuation — on paper, the fund’s stake is now worth ₹100 crore.
What do they do?
They send a newsletter claiming,
“We’ve delivered a 5x MOIC in this investment!”
But ask yourself — Has any cash come back?
Has the risk actually reduced?
Was the valuation backed by real cash flows or just hype?
The truth is: most of the MOIC figures you see floating around are paper-based, not cash-based.
This is why smart investors separate realized MOIC from unrealized MOIC — and always ask if the exit has actually happened.
When Should You Actually Use MOIC?
There’s nothing wrong with MOIC if you use it wisely. It can be extremely helpful in a few situations:
– Comparing returns across identical time frames
– Quickly evaluating exit outcomes
– Calculating headline-level fund performance (alongside IRR)
But never use MOIC when:
– Comparing investments across different durations
– Analyzing ongoing, active portfolios
– Making capital allocation decisions where time value matters
Think of MOIC like looking at the gross salary of a job.
IRR, on the other hand, is your net salary after taxes, commute, and hours worked.
One looks glamorous.
The other tells you whether it’s actually worth your time.
Final Thoughts: Real Investing Isn’t About Flashy Multiples
In investing — especially in PE, VC, or startup funding — it’s easy to get lured by a nice-looking “4.8x” or “7x” headline.
But if you truly care about creating long-term wealth, you must learn to look beyond the multiple.
Ask:
– How long did it take?
– Was it real cash or just a mark-up?
– What were the risks, failures, fees, taxes?
– Could I have done better by rotating my capital faster?
Because a flashy MOIC might win headlines, but a solid IRR wins portfolios.
And as an investor, you’re not here to be impressed. You’re here to compound wisely.