Venture Capital 2.0

The Venture LP Distress Index

VENTURE CAPITAL 2.0 COMPANION NOTE

Methodology

The Venture LP Distress Index (LPDI) is a composite gauge of limited-partner liquidity distress in venture capital, scored 0-100, where higher means more distress. It is built from five components, each drawn from a recurring public source so the index can be refreshed each quarter.

Construction

Each component is converted to a 0-100 sub-score by linear interpolation between two fixed anchors: a calm anchor (the value at which that component signals no distress, scored 0) and a crisis anchor (the value at which it signals maximum distress, scored 100). Sub-scores are clamped to the 0-100 range. The composite is the equal-weighted average of the five sub-scores - 20% each. Equal weighting is deliberate: it is the most defensible choice for a published index and avoids any appearance of tuning the result.

Sub-score = CLAMP( (value − calm) ÷ (crisis − calm) × 100, 0, 100). The same formula handles both directions: for components where a lower reading is worse (distribution yield, DPI), the calm anchor is set above the crisis anchor.

Two design rules keep the index honest. First, the mapping is linear between anchors - an explicit simplifying assumption; the index does not attempt to model non-linear distress curves. Second, crisis anchors are set at genuine extremes that current values have not yet reached, so no component is pinned at the 0 or 100 ceiling. That preserves headroom in both directions and keeps every component informative quarter to quarter. Calm anchors are grounded in strong-year readings (e.g., 2021); crisis anchors in the worst observed print or a structural floor (e.g., a 0% roll rate, or the 2023 distribution-yield trough of ~7.5%).

Components, anchors, and sources

Component	Metric	Calm (0)	Crisis (100)	Source
Distribution Drought	Distribution yield (distributions ÷ NAV)	25%	7.5%	Bain / PitchBook-NVCA
Roll Refusal	LP roll rate into continuation funds	30%	0%	NBER / Jefferies
Liquidity Haircut	Secondary discount to NAV (LP stakes)	5%	40%	Jefferies / Lazard
Exit Concentration	Top-5 share of US VC exit value	40%	95%	PitchBook-NVCA
Mark-to-Cash Gap	Flagship mature-vintage median DPI	1.0x	0.15x	PitchBook-NVCA / Carta

Bands: 0-25 Calm · 26-50 Soft · 51-75 Strained · 76-100 Severe. Weights: 20% each.

Current reading - Q2 2026

Component	Value	Sub-score	Read
Distribution Drought	14% yield	63	Distributions at ~a third of normal; GFC-level.
Roll Refusal	~6% roll rate	80	Roll rate down from 14–30% (2018) toward the 0% floor.
Liquidity Haircut	~30% discount	71	Steep, though narrowing from 2023 peaks.
Exit Concentration	87% top-5	85	Liquidity exists for five names only.
Mark-to-Cash Gap	0.27x DPI	86	2017 vintage near term-end vs 1.72x TVPI.
Composite LPDI		77	Severe

Cadence and caveats

The index is refreshed quarterly using the freshest available print for each component; components on slower (semi-annual or annual) reporting cycles carry forward until updated. Four honest caveats: (1) the calm and crisis anchors are analytical judgments grounded in cited historical extremes, documented here so the index is reproducible and any reader can re-anchor - under reasonable alternative anchorings the Q2 2026 reading ranges roughly 74-82, all within the Severe band; (2) the mapping between anchors is linear by assumption; (3) the LP roll rate is a private-equity-wide continuation-fund finding - the mechanism venture is adopting - and will be swapped for a venture-specific figure if one becomes available; (4) the 2018–2025 history is indicative annual backfill (rounded), and the true quarterly series begins Q2 2026.

The LPDI is research, not investment advice.