MOIC: how much money you made
MOIC (multiple on invested capital, sometimes called “multiple of money”) answers a simple question: for every dollar invested, how many dollars came back?
MOIC = total equity returned ÷ total equity invested
Invest $100 million and get $250 million back, and the MOIC is 2.5x. It's easy to calculate and easy to explain, but it says nothing about how long that took.
IRR: how fast you made it
IRR (internal rate of return) is the annual rate of return that makes the value of all cash in and out equal zero. Put simply, it's the compound annual growth rate of the sponsor's money.
When there's one investment and one exit, with nothing paid out in between, IRR is easy to calculate:
IRR = MOIC(1 ÷ years) − 1
When there are dividends, add-on investments or partial exits, use Excel's =IRR() on the full row of cash flows, or =XIRR() when the cash flows have specific dates.
Why time changes everything
Two deals each return 2.0x. Are they equally good?
| Deal A | Deal B | |
|---|---|---|
| Equity invested | $100m | $100m |
| Equity returned | $200m | $200m |
| Holding period | 3 years | 7 years |
| MOIC | 2.0x | 2.0x |
| IRR | ~26% | ~10% |
Same MOIC, very different IRRs. Deal A gives investors their money back four years sooner, which they can reinvest. Most funds would much rather own Deal A.
So why not just use IRR?
Because IRR can flatter quick wins. A deal that returns 1.3x in six months has an IRR near 70%, but it only made $30 million on every $100 million. You can't spend IRR; you spend dollars. That's why investors look at both:
- IRR shows how efficiently capital was used over time.
- MOIC shows how much wealth was actually created.
A typical private equity target might be something like “at least 20% IRR and 2.5x MOIC,” though targets vary by firm, strategy and market conditions.
The MOIC-to-IRR table to memorize
These are rounded and assume a single investment and a single exit. They're exactly what you need for paper LBOs and interview mental math.
| MOIC | 3 years | 5 years | 7 years |
|---|---|---|---|
| 1.5x | ~14% | ~8% | ~6% |
| 2.0x | ~26% | ~15% | ~10% |
| 2.5x | ~36% | ~20% | ~14% |
| 3.0x | ~44% | ~25% | ~17% |
How each one changes with deal decisions
- Exiting earlier at the same price: IRR goes up; MOIC stays the same.
- Paying a dividend recap in year 2: IRR usually goes up, because cash comes back sooner; MOIC may barely change.
- Holding longer to grow EBITDA further: MOIC usually goes up; IRR may fall if the extra growth is slow.
- Using more debt: both usually go up if the business performs, and both fall harder if it doesn't.
Interview-ready answer
“MOIC measures how many times you multiplied your money; IRR measures the annualized rate at which you did it. MOIC ignores time and IRR doesn't, so a 2.0x return is about 26% IRR over three years but only about 10% over seven. Firms look at both, because IRR can look great on a small, quick win while MOIC shows how much value was actually created.”
Calculate both in a live model
The free “Exit and sponsor returns” lesson has you build MOIC and IRR step by step.