What is IRR in venture capital?

IRR (internal rate of return) is the annualized return implied by a fund's cash flows — money in, money out, and the timing of both. Net IRR, after fees and carry, is what LPs actually receive.

IRR rewards early distributions and can be gamed with timing (subscription lines famously flatter early IRR), so LPs read it alongside multiples like TVPI and DPI. Early in a fund's life IRR is nearly meaningless — see the J-curve.