IRR (internal rate of return): calculator, formula and VC benchmarks

What is IRR?

Key facts

• LPs still rank IRR first: DPI and MOIC are tied "for the second-most-important metric", and "IRR remains the leading focus". (McKinsey, 2026)
• VCs who use IRR to judge deals require 31% on average; late-stage and larger VCs require 28% to 29%. (Gompers et al., 2020)
• Private equity investors typically target a 22% IRR, with most targets between 20% and 25%. (Gompers et al., 2016)
• In one study, subscription credit lines raised IRR-based performance by 6.1 percentage points while multiples slightly declined. (Albertus & Denes, 2019)
• The median 2017-vintage US VC fund on Carta has a 9.2% net IRR; the top quartile starts at 15.5% (Q1 2026). (Carta, Q1 2026)

IRR calculator

Cash-flow mode takes dated flows and returns the IRR, the way Excel's XIRR does. Multiple ↔ IRR converts between the two for a single check. Subscription line shows how a credit line lifts IRR without adding a dollar.

How to calculate IRR

NPV = Σ CFₜ ÷ (1 + IRR)^t = 0

In words: find the annual rate at which the present value of every cash flow, money in as negative and money out as positive, adds up to zero.

• CFₜ: The cash flow at time t: checks and capital calls as negatives, distributions and the current value as positives.
• t: Years from the first cash flow, counted to the exact date in XIRR.
• IRR: The rate you solve for. There is no closed form, so spreadsheets and our calculator find it by iteration.

Worked example

The same seed position as on our MOIC page: four dated flows over six years. The numbers are illustrative, and the results below are computed by the calculator's tested code.

$3,600,000 of value on $1,500,000 invested MOIC 2.4x 0.8x realized 67% still on paper IRR 18.6% over 6.2 years

Bring the $1.2M secondary sale forward by one year and the IRR rises to 20.2%, while the multiple stays at 2.4x. Same money, sooner, so a higher IRR.

In a spreadsheet

• IRR of dated flows, with dates in A2:A5 and flows in B2:B5 (money in as negatives): =XIRR(B2:B5, A2:A5)
• IRR of evenly spaced yearly flows in B2:B8: =IRR(B2:B8)
• Modified IRR, with a finance rate in C1 and a reinvestment rate in C2: =MIRR(B2:B8, C1, C2)
• Multiple needed for a target IRR in B1 over B2 years: =(1+B1)^B2

How founders and investors read IRR

What is a good IRR?

A good IRR depends on what you compare it with: a fund's vintage peers, what investors require before they invest, or a buyout target. The fund IRRs below are net of fees and carry; the deal targets are gross.

Benchmarks

Required and realized IRRs sit far apart. VCs ask 31% of a new deal, while top-quartile 2017 and 2018 US VC funds on Carta deliver about 15% net (our comparison). Fees, carry and the deals that fail make up the gap.

Compiled Oct 2, 2026. Next review: December 2026, after Carta's Q3 2026 release. Left out: Cambridge Associates (Its licence bars reuse of its benchmark figures without written permission); PitchBook benchmarks (Available to PitchBook clients only). Download these benchmarks as CSV.

IRR in the wild: the highest IRRs belong to funds that have not paid out

Four CalPERS private equity commitments, as CalPERS reported them as of 31 March 2026. The cash-back column is our arithmetic from CalPERS's figures. (CalPERS, Mar 2026)

† CalPERS flags every fund with a vintage of 2021 or later as Not Meaningful.

The two youngest funds post the highest IRRs, 41.3% and 37.1%, and have returned no cash yet. Insight Venture Partners X has paid back 1.18 times its money at a 20.3% IRR. Yucaipa's 2008 fund has paid back 1.16 times at 7.5%, eighteen years in.

CalPERS computes net IRR "based on CalPERS' actual cash flows and the reported value of the invested capital", so a young fund's IRR rests on marks. Its own guidance: "In evaluating private equity performance, CalPERS emphasizes using both the realized Internal Rate of Return (IRR) and Investment Multiple. Interim IRRs by themselves are not the best indicators of current or future fund performance."

IRR vs MOIC, TVPI, DPI, MIRR and PME

For one check and one exit, IRR = MOIC^(1 ÷ years) − 1, so a multiple and a holding period pin down the IRR. Excel's MIRR "considers both the cost of the investment and the interest received on reinvestment of cash".

The multiple a target IRR needs

The multiple one check must return to hit a target IRR, computed by the calculator's code. At the 31% VCs require on average, a seven-year hold needs about 6.6x; Bain's 20% over five years needs 2.5x.

Common mistakes: how IRR gets flattered

1. Letting early exits inflate it. IRR rewards speed, so a quick small win can outshine a larger, slower one. Phalippou: "IRR gives disproportionate weight to early exits, creating incentives to sell winners too early and hold losers too long" (PitchBook, Jun 2026).
2. Ignoring the subscription line. Borrowing to delay capital calls shortens the time LPs' money is at work, which lifts IRR while the multiple dips by the interest. Albertus and Denes found that "the use of SLCs increases IRR-based performance by 6.1 percentage points, while multiples-based performance slightly declines" (2019). Try it in the calculator's Subscription line mode.
3. Reading an interim IRR as cash. Before exits, IRR treats today's marks as if they were cash. PitchBook's Kyle Stanford reads VC's "17.1% one-year horizon IRR" as reflecting "valuation momentum more than realized liquidity" (PitchBook, Aug 2026).
4. Forgetting the reinvestment question. Critics such as Phalippou argue that IRR implicitly assumes interim cash is reinvested at the IRR itself (see his quote below). MIRR lets you set the reinvestment rate instead (Microsoft).
5. Trusting flows that change direction twice. If money goes in, comes out, then goes in again, the equation can have two IRRs or none. The calculator warns when flows switch direction more than once (our arithmetic).
6. Taking gross as net. Fees and carry sit between a deal's gross IRR and an LP's net IRR. The SEC's Marketing Rule bars advisers from showing gross performance in an ad unless net performance is shown alongside it (17 CFR 275.206(4)-1).

Where IRR came from and how it's regarded today

How it's regarded today

• Still the headline metric. McKinsey's 2026 LP survey: "IRR remains the leading focus" (McKinsey).
• Paper is running ahead of cash. "Since 2022, net cash flow to LPs has been negative $202 billion, even as market value and AUM have continued to increase" (PitchBook, Aug 2026).
• Older vintages disappoint. "The 2015–17 vintages are generating roughly 2 percent IRRs, pulling average buyout return from 2015 to 2025 to about 6 percent despite newer vintages showing—largely unrealized—15 percent IRR" (McKinsey, 2026).
• Reported both ways. ILPA's 2025 template standardizes "IRRs and TVPI/MOIC, with designated breakouts for reporting the relevant gross and net figures with and without the impact of fund-level subscription facilities" (ILPA).
• Read with a multiple. The SEC's rule release explained why: "a high internal rate of return but a low multiple of invested capital likely means that the investment was not held long enough to generate substantial returns for the fund" (2023).

What experts say about IRR

Where they disagree

An academic and a regulator on whether IRR still earns its place in a fund report.

IRR FAQ

Related metrics and guides

• MOICHow much money came back, with no clock.
• VC fund metrics: the guideHow the fund metrics read together.
• Cap table dilution guideHow later rounds shrink your investor's stake and their return.
• Reserves and follow-on planningHow follow-on checks change a fund's IRR and multiple.
• Portfolio monitoring for VCsKeeping marks, and so IRRs, current across a portfolio.