Realization Multiple

Venture capitalists are all about the bottom line (which drives their carry or profit participation millions), a.k.a. the realization multiple.

When scouting for businesses to boost, venture capitalists and investors always check the realization multiple, also called the "distributed to paid in capital." The realization multiple represents the returns investors got from private equity holdings.

The more money that’s paid out to investors, the higher that company’s realization multiple will get. Cue: investors flocking to the money like monkeys to a banana truck.

The realization multiple is the amount of cumulative distributions divided by paid-in capital. If you were an individual investor, you’d probably be using different math, but the division happening here helps investors see the gains per paid-in-capital. For instance, you could look at a company with a realization multiple of 2, which means you’d start dreaming about that company doubling your money.

No guarantees though, pal.