The DPI hasn't reached 1.2, and the state-owned assets have exercised a veto.

"There are plenty of funds with a DPI of less than 1. I used to think it was better to buy financial products, but later I found that it's even better to deposit money in a fixed - term account," a limited partner (LP) told a reporter from Rongzhong bluntly.

Behind the change in LPs' attitudes is the shift from "listening to stories" to "seeing cash returns."

However, on the other side of the coin are the cruel statistics.

Data shows that GPs (general partners) who can achieve a DPI of 1 in 7 years are already considered excellent funds. The median - performing funds take about 9 years to reach a DPI of 1, and the bottom - tier funds take around 13 years to achieve a DPI of 1.

But LPs have a different frame of reference.

A state - owned mother fund once publicly stated that before applying for the next round of capital injection, the DPI of the GP's previous funds must not be less than 1.2; otherwise, the application will be rejected immediately.

The question is, is it slow to achieve a DPI of 1 in 7 years?

The Clocks of LPs and Funds Are Not in Sync

Currently, the venture capital circle is witnessing a "Rashomon" of time.

From a data perspective, GPs that achieve a DPI of 1 in 7 years are among the top 25% in the industry. However, in the eyes of LPs, this is not something to be proud of; in fact, it's even "falling behind."

Many GPs believe that LPs should be more mature and should not make statements like "achieving a DPI of 1 in 5 years." However, in reality, more and more LPs, who don't solely focus on "returns" as the main evaluation criterion, are also starting to pay attention to "cash - back speed."

A typical example is government - guided funds.

In recent years, as LPs have become more mature, government - guided funds are returning to their "financial" nature rather than being mainly used for "investment promotion."

The head of an angel mother fund said bluntly, "More and more government - guided funds, on the basis of investment promotion, are starting to focus on the returns of sub - funds. What's the DPI? How many years will it take to reach 1? This is a return to the essence of private equity."

In the past, government - guided funds emphasized investment promotion, and the reinvestment requirement was the key focus. However, now, in the requirements of government - guided funds, there are also demands for exits.

For market - oriented LPs, DPI is an absolute concern. They focus not only on the numerical value but also on the time.

A bank employee told a reporter from Rongzhong that high - net - worth bank customers prefer a shorter DPI cash - back period. The common "10 + 2" model of US dollar funds is difficult to be accepted in the RMB market. LPs need to "experience" cash returns within a certain period.

The logic behind this is not complicated. High - net - worth bank customers are used to the regular payment rhythm of financial products, the rigid payment expectations of trusts, and the certainty of fixed - term deposits. When they enter the private equity market, they have a "high - return financial product" mindset rather than a "long - term capital allocation" framework.

Thus, a fundamental cognitive misalignment occurs: The clock of funds is measured by the "investment cycle," while the clock of LPs is measured by the "cost of capital occupation." The two clocks are never in sync.

Some LPs have even exclaimed, "It's almost the fifth year, and the DPI still hasn't reached 1?" This makes GPs smile wryly and say, "We still need to find the right money for our funds."

Some LPs even require GPs to sign a clause stating that if the annualized return fails to reach 6%, the management fee will be deducted.

For LPs, a GP that cannot handle exits has incomplete management capabilities.

There is a popular joke in the market: LPs come for the IRR (high returns), but in the end, they are just grateful if they can keep the DPI (principal return).

GPs complain, "The current environment is not good," "Secondary market exits are blocked," "Projects are affected by policies," etc. But LPs' logic is like taking a taxi: "I paid the money, and you have to take me to my destination within the expected time. Now the car is stuck in traffic, and you're talking to me about how well - designed the engine is. I just want to know: The meter is running so high. When can I get off?"

DPI = Trust value.

"Actually, we're all financial workers with our own KPIs," an LP in charge of investment at a listed company told Rongzhong. "Without DPI, we can't explain to our internal auditors/board of directors, and we can't continue to invest in GPs."

LPs' patience is also subject to KPI assessment.

Is the "1.2" Threshold for State - Owned LPs Reasonable?

A state - owned mother fund requires that before a GP applies for the next round of capital injection, the DPI of its previous funds must not be less than 1.2; otherwise, the application will be rejected.

This standard may seem strict, but it has its internal logic. A DPI of 1.2 means not only the return of the principal but also a 20% real cash return.

In the performance evaluation system of state - owned assets, this can at least prove to the auditors and the board of directors that "the money is not wasted." More importantly, it is a screening mechanism. GPs that can achieve a DPI of 1.2 within a reasonable time are likely to have real exit capabilities rather than just being good at telling stories.

However, from another perspective, this threshold may create a "conservatism driven by survivor bias." When GPs know that their next - round fundraising depends on DPI, they may be inclined to cash out high - quality projects early (even if the valuation is not ideal) rather than hold them for greater returns.

The pressure of DPI is distorting GPs' investment decision - making logic, shifting from "optimizing returns" to "optimizing cash flow."

In fact, the current DPI anxiety is not driven by a single factor but is the result of the superposition of three forces.

First, the systematic narrowing of exit channels.

In the past, the mainstream exit paths for Chinese VC/PE highly relied on IPOs. A - shares, Hong Kong stocks, and US stocks took turns, giving a generation of GPs the confidence that "as long as you can hold on, you can exit." However, with the tightening of the regulatory environment, the pressure on Chinese concept stocks in the US market, and the differentiation of liquidity in the Hong Kong market, the IPO window has changed from "periodic closure" to "structural narrowing." The single - channel nature of exits directly transmits the DPI pressure without any dispersion.

Second, the change in the LP structure.

In the past decade, there have been profound changes in the sources of funds in China's venture capital market. Government - guided funds are gradually returning to their financial nature from being investment - promotion tools. State - owned LPs are starting to focus on "whether the invested money can be recovered." Institutional LPs such as banks and insurance companies bring greater pressure on asset - liability matching. High - net - worth individual LPs, after facing pressure in their main businesses, urgently need cash returns to support liquidity.

The change in the LP structure essentially means a decrease in the proportion of patient capital.

Third, the re - pricing of the interest - rate environment.

This aspect is less discussed in China but is equally crucial. When the risk - free interest rate (fixed - term deposits, financial products, national bonds) remains at a certain level for a long time, LPs' requirements for the opportunity cost of private equity will increase accordingly. To some extent, "achieving a DPI of 1 in 7 years" means locking up funds for 7 years. If the annualized return of financial products is 3% compounded over the same period, the principal would have already increased significantly. This makes a DPI of 1, which only "preserves the principal," not a passing grade in the eyes of LPs but a de facto loss.

Overseas LPs Also Worry about DPI

It's not just domestic LPs; foreign LPs also need "realization" to achieve their goals.

Generally speaking, top - performing US VC funds need 7 - 8 years to recover the principal, the median - performing US funds take about 9 years to reach a DPI of 1, and the bottom - tier US funds take about 12 years to recover the principal.

This means that the principal - recovery cycles of top - tier funds in China and the US are almost the same. Most funds usually take 8 - 10 years to achieve a DPI > 1.

In the past, there was a popular narrative that institutional LPs like the Yale Endowment Fund and CalPERS were "truly patient capital" and could give GPs enough time.

However, after 2025, the situation is changing.

As the benchmark interest rate remains at a relatively high level, LPs have higher requirements for the opportunity cost of risk capital. They no longer accept the "IRR after valuation adjustment" and publicly require GPs to show a clear exit roadmap.

As the external environment becomes more stringent, DPI has become the only truth.

LPs generally adopt a "concentration plan," concentrating funds on top - tier GPs that have proven their DPI delivery capabilities. Small and medium - sized GPs can hardly complete follow - up fundraising without a good DPI.

Patient capital is not infinitely patient; it only shows patience to GPs that have the ability to deliver.

However, compared with their Chinese counterparts, foreign GPs have more mature strategies for improving DPI.

Different from the high dependence on IPOs in China, a large part of exits in the US market are achieved through mergers and acquisitions. When the IPO window fluctuates, GPs actively promote the acquisition of invested companies by large technology giants or large private equity funds.

In addition, GPs can launch a new fund to take over high - quality projects from the old fund, providing cash exits for LPs of the old fund.

Another method is in - kind distribution. After the company goes public, the stocks are directly distributed to LPs, allowing LPs to decide the timing of realization. This is very mature in terms of legal and tax operations.

The global venture capital market is currently experiencing a "DPI crisis." The common point is that LPs no longer believe in paper wealth, and the speed of cash return determines the survival of GPs.

The differences are also obvious. The foreign market has a larger S - fund (secondary market) and a more developed M&A ecosystem as a buffer. This means that even when the IPO window is closed, GPs still have multiple ways to push the DPI towards 1. In China, since the M&A market is still in the cultivation stage, the DPI pressure often directly leads to a deadlock between GPs and LPs.

The Real Problem Is Not 7 Years but "Whether It Can Be Achieved in 7 Years"

Let's go back to the original question: Is it slow to achieve a DPI of 1 in 7 years?

The answer from objective data is: It's not slow; in fact, it's even fast. The answer from LPs' subjective feelings is: It's not fast enough; there's still a long way to go. The answer from GPs' hearts is: We've tried our best, but we can't compete with the market structure.

The co - existence of these three answers constitutes the deepest tension in the current venture capital industry.

What's more worth asking is not "whether 7 years is fast or not" but: In the current market environment, how many funds can achieve a DPI of 1 in 7 years?

There are "plenty" of funds with a DPI of less than 1. This is the real industry reality. Against this background, setting a DPI of 1 in 7 years as the passing grade is not so much a way to make things difficult for GPs as it is a way to force the entire industry to face a problem that has long been masked by the illusion of high IRR: The Chinese venture capital market lacks a deep enough exit ecosystem to support the existing investment scale.

The speed of money flowing in exceeds the ability of money flowing out.

This is not a problem of GPs or LPs but a problem of the entire market infrastructure. The DPI dispute is just a concentrated manifestation of this structural contradiction in the current cycle.

In the short term, it can be predicted that GPs will increase their efforts to promote M&A exits, even if the premium is limited. S - funds will see more supply, but the liquidity discount will also widen. Some GPs will use the strategy of "exiting old projects to gain trust for new ones" to maintain the fundraising rhythm.

However, these are just maneuvers within the existing contradictions and cannot solve the fundamental problem.

In the long run, the real resolution of the DPI pressure in China's venture capital market requires three things to happen simultaneously: The real maturity of the M&A market, so that IPO is no longer the only exit path; The formation of sufficient liquidity depth in the S - fund market, so that share transfer becomes a regular tool; The shift of the LP structure towards truly long - term capital, so that "patience" is no longer a luxury but a basic configuration of the industry.

Before these three things happen, DPI will continue to be the most acute point of contradiction between LPs and GPs.

7 years is neither slow nor enough.

This paradox is the most real situation in China's venture capital industry at present.

For this year, 7 years is both the end of a long - distance race and the end of trust. Everyone has to endure this test.

This article is from the WeChat official account "Rongzhong Finance" (ID: thecapital). Author: Abu, Editor: Wuren. Republished by 36Kr with authorization.