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DPI Trends in Early-Stage Israeli VC

Updated: Nov 24, 2025

DPI Trends in Early-Stage Israeli VC Funds (2019–2023)

Limited Partners (LPs) in venture capital pay close attention to Distributions to Paid-In capital (DPI) – a key metric indicating how much cash a fund has actually returned relative to the capital contributed. This report analyzes DPI trends over the past five years among early-stage Israeli venture capital funds, using the provided dataset of 100 Israeli VC firms alongside industry data. We examine how overall DPI performance has evolved year by year, identify standout funds with notable distributions, and discuss the factors influencing these trends. Throughout, the focus is on insights relevant to LPs: understanding the exit environment, the impact of fund size and sector focus on returns, and the risks/patterns LPs should heed when allocating capital to early-stage Israeli funds.



Overall DPI Performance (2019–2023)

 Figure: Total annual exit value of Israeli tech companies (M&A and IPOs) from 2019 to 2023, reflecting the volume of liquidity events driving venture fund DPI (Data from PwC Israel reportstimesofisrael.comtimesofisrael.comtimesofisrael.com).

Early-stage fund DPI is intrinsically tied to the exit environment. In Israel, the exit climate over 2019–2023 was a rollercoaster, which in turn drove dramatic fluctuations in DPI potential:

  • 2019: A relatively moderate year, with tech exits totaling ~$9.9 billion across ~80 dealstimesofisrael.com. Many early-stage funds saw limited distributions, as is typical in the initial years of a fund’s life.

  • 2020: Exit value jumped to $15.4 billiontimesofisrael.com, aided by a few larger deals. Some funds began to see DPI improvements as acquisitions and an initial trickle of IPOs (e.g. Fiverr’s 2019 IPO) translated into cash returns.

  • 2021: A record-shattering exit boom occurred. Israeli tech exits surged ~520% to $81.2 billion in valuetimesofisrael.com – an unprecedented wave of IPOs (over 70, including high-profile listings like ironSource, SentinelOne, and Monday.com) and big-ticket acquisitions. This liquidity bonanza in 2021 markedly boosted DPI for many funds that were mature enough to capitalize on it. Funds launched in the mid-2010s benefited enormously, seizing the opportunity to distribute proceeds from companies that went public or were acquired at high valuations. In industry-wide data, even globally 2017-vintage funds showed far higher DPI by year 4–5 than later vintages, likely because they benefited from the 2020–2021 exit bubblethevcfactory.com.

  • 2022: The party abruptly ended. Exits plummeted ~80% in value to just $16.9 billiontimesofisrael.com, as rising interest rates and a global market downturn dried up IPOs and M&A. The number of Israeli tech exit deals fell by 58% (72 vs. 171 the year prior)timesofisrael.com. For VC funds, this meant DPI progress stalled – few new distributions were realized in 2022. Many early-stage funds that had only paper gains saw no cash events, echoing a broader trend: newer vintage funds struggled to return capital amid a “challenging exit environment” with “lower liquidity”thevcfactory.com.

  • 2023: The downturn deepened. Exit values slumped a further 56% to about $7.5 billion, the lowest in a decadetimesofisrael.com. Only 45 exits occurred in 2023, as both global economic conditions and local factors (including political uncertainty and war) deterred deal-makingtimesofisrael.comtimesofisrael.com. Consequently, most early-stage funds’ DPI remained low – with distributions largely on hold. Many funds were left waiting for the exit market to revive to realize returns.

Overall, the past five years saw Israeli early-stage fund DPI whipsaw with the market. An extraordinary 2021 liquidity windfall was flanked by years of relative drought. For LPs, this underscores that venture DPI is highly cyclical: today’s high valuations and unrealized multiples can vanish unless exits actually occur. The data also illustrates a classic VC dynamic – the J-curve effect – where funds show minimal DPI in early years, then (if fortunate) a sharp uptick when major exits finally hit. We will explore this pattern and its implications for LPs in a later section.



Standout Funds and DPI Leaders

Within this diverse cohort of Israeli VC funds, a few stand out for delivering significant distributions in recent years. These funds either benefited from timely big exits or have long track records of successful realizations:

  • Pitango Venture Capital: Founded in 1993, Pitango is Israel’s longest-running VC and has raised 14 funds to date. It manages over $3 billion and has accomplished over 90 exits via public listings (NASDAQ/NYSE) or acquisitions by tech giantsen.wikipedia.org. This includes past IPO success stories (e.g. Varonis, Forescout) and recent exits like Via and AppsFlyer (still private but with secondary liquidity events). Pitango’s extensive exit count – “90+ companies becoming publicly traded or acquired by Google, Apple, IBM, Cisco…”en.wikipedia.org – reflects an outlier DPI track record. LPs in Pitango’s early funds have likely enjoyed multiple cash distributions over the decades, and even its more recent funds saw sizable payouts during the 2020–2021 boom (for example, Pitango was an investor in cybersecurity firm Guardicore, acquired in 2021 for $600M). Such a breadth of exits underscores how established funds with many portfolio companies across vintages can consistently drive DPI.

  • OurCrowd: Founded in 2013 as an online VC investment platform, OurCrowd has a unique model (crowdfunding LP capital into deals), yet it has achieved noteworthy DPI outcomes. As of late 2022, OurCrowd recorded over 60 exits, including several high-profile IPOs like Beyond Meat (2019) and Lemonade (2020), as well as M&A exits like Jump, Wave and CyberXen.wikipedia.org. These exits provided liquidity to OurCrowd’s investors; for instance, Beyond Meat’s IPO and run-up would have allowed distributions if shares were sold. OurCrowd’s ability to source and back such companies early translated into realized gains for its LP base. It’s a reminder that even alternative models of VC can deliver DPI if the portfolio produces enough exits – “OurCrowd’s startups have recorded 60+ exits including stock market listings like Beyond Meat, Lemonade, Innoviz…”en.wikipedia.org.

  • Aleph: An early-stage fund founded in 2013, Aleph is an example of an emerging Israeli VC that quickly yielded DPI through big wins. Aleph’s portfolio famously includes Lemonade, the AI-driven insurer that IPO’d in 2020, and Windward, which went public via SPAC in 2021. These two IPOs occurred within roughly 7–8 years of Aleph’s launch – remarkably fast in VC termsen.globes.co.il. The Lemonade IPO, in particular, gave Aleph a chance to return capital early; Lemonade’s market cap briefly hit $10+ billion in 2021, and if Aleph sold shares near the peak, that would have realized a substantial multiple. (Notably, Lemonade’s stock later fell from a $13 billion valuation to around $1 billion by mid-2023en.wikipedia.org, underscoring the importance of timing distributions). Windward’s public listing on the LSE added another liquidity event. Thanks to these exits, Aleph’s first fund likely reached a DPI well above typical early-stage norms by year 8. This makes Aleph a standout young fund with early DPI success – albeit one tempered by the volatile post-IPO performance of its portfolio companies.

  • Global VC Affiliates (Sequoia, Bessemer, etc.): Several international funds with Israel-focused arms also realized notable exits benefiting their LPs. For example, Bessemer Venture Partners’ Israel team saw Fiverr go public in 2019 and Habana Labs (AI chip startup) acquired by Intel for $2 billion in 2019 – both events yielding cash returnsaxios.com. Sequoia Capital Israel similarly had stakes in winners like ironSource (merged 2021) and Mobileye (IPO 2022 follow-on). While these funds aggregate performance globally, their Israeli portfolios contributed meaningfully to DPI. Their standout exits highlight that early-stage investing in Israel has produced several billion-dollar outcomes in recent years, rewarding those investors positioned in the right deals.

It’s worth noting that many other Israeli funds are still on the journey to significant DPI. For instance, historic funds like Jerusalem Venture Partners (JVP) or Vertex Ventures Israel had major exits in the 2000s/early-2010s (e.g. JVP with CyberArk and QlikTech, Vertex with Waze and SolarEdge), giving them high DPI over their lifespan. But in the 2018–2023 window, these older funds have been relatively quieter (their DPI came from earlier vintages). On the flip side, newer micro-funds and seed funds launched in recent years may have zero DPI so far, as they are still in the investment/J-curve phase awaiting first exits. The wide range of outcomes – from Pitango’s steady flow of cash distributions to a seed fund’s 0.00x DPI at year 5 – emphasizes the skewed nature of venture returns. Indeed, according to Israel’s Innovation Authority, roughly 20% of domestic VC funds generate 80% of the profits in the marketoecd.org. Identifying those top-performing funds (often the ones behind the big exits above) is crucial for LPs aiming to earn strong DPI.



Factors Influencing DPI Changes

Several factors have driven the changes in DPI for Israeli early-stage funds in the past five years:

Exit Environment and Timing

The overarching determinant of DPI has been the exit environment. As detailed earlier, Israel’s tech sector went from boom to bust in rapid succession:

  • Boom periods (especially 2020–2021) provided abundant opportunities for distributions. Funds that had companies maturing during this window often took advantage of liquidity events. For example, vintage-2017 funds (both in Israel and globally) “benefited from the exceptional 2020–2021 VC bubble and many firms profited to exit with high returns”thevcfactory.com. LPs in those funds saw DPI jump as IPO proceeds and acquisition payouts were realized. The timing was key – these funds were old enough (4+ years) to have scalable companies when the market was hungry for tech IPOs. They could distribute shares or cash from exits like SentinelOne or Monday.com, locking in gains.

  • Downturn periods (2022–2023) have the opposite effect – a paucity of exits means even mature funds struggle to generate DPI. The past two years in Israel have been characterized by what PwC called a “significant slowing down” and “bear market for new tech offerings”timesofisrael.com. Entrepreneurs and investors largely went into “wait-and-see mode,” and Israeli tech exits in 2022 returned to 2019–2020 levelstimesofisrael.com. For LPs, this meant that many funds delivered little or no new distributions in those years. Newer funds launched around 2018–2020 were especially impacted – by 2023, they are 3–5 years old (the period when one might hope for early exits), but the tough climate left “newer vintages struggling to distribute capital early on”thevcfactory.com. Simply put, DPI is a lagging indicator that only improves when liquidity events occur, and in a drought, even strong paper gains don’t convert to cash.

Timing within a fund’s lifecycle is crucial as well. There is typically a J-curve: negative returns in early years (fees and unrealized investments), then an upswing as exits happen. Data from Sapphire Partners show historically it takes around 8 years for a venture fund to reach 1.0x DPI (returning an amount equal to paid-in capital)thevcfactory.com. Interim DPI at year 5 or earlier often remains low (e.g. 0.2–0.4x), even for funds that eventually become top performersthevcfactory.com. The past five years reinforced this pattern – many Israeli early-stage funds from the 2017–2019 vintages were only beginning to see DPI traction by 2021–2022 (year 4–5 for them), just as exits slowed again. LPs need to be mindful that patience is required; a fund that looks dormant in DPI at year 5 may still succeed later (as happened in some cases after the 2021 boom). Conversely, a flurry of exits can rapidly boost DPI if timed right. In short, macro cycles and vintage timing heavily influence DPI. LPs benefit when their fund’s harvest period aligns with a strong exit market, as it did for some in 2021, and must weather dry spells when the cycle turns down.



Fund Size and Stage Focus

The size of a fund and its stage focus (seed, Series A, etc.) also affect DPI trajectories:

  • Smaller early-stage funds often have a more concentrated portfolio and lower denominators (i.e. smaller fund size), so a single big exit can dramatically improve DPI. For instance, if a micro-VC with a $30M fund hits a $300M acquisition, that one deal could return the fund (DPI 1.0x) or more. Indeed, the Carta dataset (largely U.S.-focused but reflective of emerging managers broadly) noted a potential sample bias: “60% of the funds in the dataset [vintages 2017–2022] were under $25 million and only 10% over $100 million”, meaning performance metrics skew toward what happens with these smaller fundsthevcfactory.com. Some Israeli seed funds fall in this category. A positive aspect is quicker DPI if an early exit hits (small funds can start distributing earlier). However, smaller funds also face high variance – if no early exits occur, DPI stays near zero for longer. This may be why Beezer Clarkson of Sapphire Partners observed that several of her eventual 3x return funds had 0% DPI by year 5thevcfactory.com; many early-stage funds won’t show DPI progress until a big winner “breaks out”. LPs in such funds must be comfortable with a long wait and the binary nature of outcomes (one deal can make or break the fund’s DPI).

  • Larger funds (including multi-stage funds) tend to be more diversified and may take longer for exits to meaningfully move the needle on DPI. A $300M fund needs multiple $100M+ exits to return capital. On the other hand, large funds might have resources to support companies longer and exercise pro-rata in later rounds, perhaps yielding higher TVPI (Total Value to Paid-In) even if DPI realization is delayed. In Israel, we have a mix: a few big funds (e.g. Pitango’s $250M+ vehicles) and many smaller ones (<$100M). The DPI trend can thus bifurcate by size – in 2021, some small funds popped to high DPI by selling one unicorn, whereas larger funds distributed some cash but mostly still held a lot of unrealized value (since they could afford to wait or had more companies yet to exit). An illustrative data point from global analysis: the best-performing venture fund in a study had a final DPI of 12.3x, but at year 5 its DPI was zero, whereas another fund that looked good at year 5 with 1.28x DPI ended up only 2.55x finalthevcfactory.com. The lesson is that fund metrics at mid-life can be misleading – smaller funds might show earlier DPI if they flip an investment, while larger funds might show lower interim DPI but catch up later as more exits materialize. For LPs, evaluating an early-stage manager requires understanding their strategy on follow-ons and exit timing: some aim for quicker, smaller exits (boosting DPI), others hold for bigger outcomes (boosting TVPI first, DPI later).

  • Stage focus within early-stage: Even among “early-stage” funds, there’s a difference between those doing pre-seed/seed vs. those leading Series A/B. Slightly later-stage funds might see exits sooner (their companies are closer to maturity). In our dataset, many Israeli funds combine seed and A rounds. Those that are pure seed (with very long horizons) will naturally have slower DPI realization. Sapphire Partners’ data suggests many emerging VC funds don’t reach 1x DPI until roughly year 8thevcfactory.com, which implies that a seed-focused 2018 fund might only now (2025–2026) approach returning capital – delayed further if exits were scarce in 2022–2023. Thus, stage focus intertwines with size: micro-seed funds = long wait for DPI (unless they get lucky with an acqui-hire or early sale), whereas Series A funds could potentially see some returns by years 5–6 if they had a breakout that IPOs in a hot market.


In summary, fund size and focus shape the DPI curve. Smaller, early seed funds have volatile but potentially faster DPI upticks (with luck), while larger or multi-stage funds show more averaged-out, slower-building DPI (but often higher ultimate multiples). LPs should set expectations accordingly and diversify across fund sizes/stages to balance these profiles.



Sector Focus and Exit Markets

The sector focus of a fund can significantly influence its DPI outcomes, especially in a tech ecosystem as sector-concentrated as Israel’s:

  • Cybersecurity and Enterprise Software: These have been Israel’s flagship sectors and have yielded numerous exits. Notably, cybersecurity has dominated recent M&A activity, accounting for 58% of total exit value in 2025 (a trend already evident in prior years)prnewswire.com. Funds with a strong cyber focus (e.g. Israel’s YL Ventures or Team8 in our list) have benefited from a steady flow of acquisitions. Large global tech companies (Palo Alto Networks, Google, Microsoft, etc.) have been avid acquirers of Israeli cyber startups. For example, in 2021–2022 there were multi-hundred-million-dollar acquisitions like SentinelOne (IPO), OrCam (strategic sale) and Armis (PE buyout) in the cyber domain. These exits provided early distributions for specialized funds. A fund investing in cybersecurity might have seen DPI sooner than one in, say, deeptech hardware, simply because buyers were active in cyber. The data supports this: in Q3 2025, major cyber acquisitions (e.g. a $25B buyout of CyberArk, $32B of Wiz) drove Israeli M&A to record levelsprnewswire.com – while those specific deals happened in 2025, the precedent of large cyber exits was set in years prior (e.g. Microsoft’s $500M purchase of IoT security startup CyberX in 2020, Google’s $500M of Siemplify in 2022timesofisrael.com). LPs allocating to Israel should note the ecosystem’s strength in cyber: funds in this sector might deliver distributions earlier (due to frequent M&A), but once the low-hanging fruit is gone, remaining portfolio companies might take longer (or rely on IPOs) for exit.

  • Fintech and Enterprise SaaS: These sectors also saw significant exits (for instance, ironSource in ad-tech/gaming, Forter and Riskified in fintech, Fiverr and Outbrain in marketplace/ads). Israeli funds with fintech focus enjoyed the 2021 IPO wave (Riskified IPO’d 2021, Global-e in e-commerce 2021, etc.). However, fintech valuations also swung widely. A fund that distributed shares of an IPO like Lemonade or Riskified in 2021 might have locked in value, whereas those that held saw big drops. Sector momentum matters: fintech boomed in 2021, then crashed – so DPI could spike and then stall if follow-on exits dried up. Enterprise software (B2B SaaS) remained a steady exit sector; e.g., JVP’s focus here saw exits like Gong (secondary sales at high valuations, though IPO pending). Funds with B2B portfolios may not have the quick acqui-hire exits of cyber, but when their companies exit, it’s often through high-value sales or IPOs, which can deliver large DPI in one go (as seen with Monday.com’s nearly $7B IPO valuationtimesofisrael.com, benefitting its early VCs).

  • Deep Tech and Life Sciences: Funds targeting deep tech (semiconductors, frontier technology) or biotech/med-tech typically have longer gestation and fewer exits in the short term. In Israel, examples include funds like OurCrowd’s Qure (healthtech) or Terra Venture Partners (cleantech) – these may see DPI much later. However, when exits come, they can be sizable (e.g. Habana Labs’ $2B acquisition by Intel in 2019 was a deep-tech AI chip exitaxios.com that delivered a windfall to its investors, including Bessemer and Vertex). Still, such sectors might require 7–10+ years for those outcomes. LPs in sector-specific funds should gauge whether that sector’s exit market is currently hot or cold. Over 2019–2023, life-science exits were relatively few in Israel, whereas tech exits dominated. A biotech-focused fund likely has near-zero DPI from this period, whereas a cyber-focused fund likely distributed capital from at least a couple of acquisitions.


In essence, sectors that align with active acquirers or IPO trends will translate to faster DPI. Israel’s last five years were kindest to investors in cyber, fintech, and enterprise software. Funds concentrated in those areas rode a favorable wave (until 2022’s dip). By contrast, funds in slower sectors accumulated unrealized value that may only translate into DPI in the future (requiring LPs’ extended patience). Diversified funds balance this — many Israeli funds are broad (ICT generalists), capturing some fast exits and some slow-burners. LPs should be aware of any sector concentration risk: if a fund’s entire portfolio is in a currently frosty sector, DPI could lag market averages.



Risks and Patterns for LPs to Consider

Analyzing these trends yields several insights and cautions for LPs allocating to early-stage Israeli VC funds:

  • The J-Curve and Patience: Early-stage VC funds typically show minimal DPI in their first ~5 years. This was reaffirmed by recent data – even high-quality funds often had DPI <0.5x at year 5thevcfactory.com. LPs must set expectations that meaningful cash returns often begin only in years 6–10. In our dataset, many funds founded around 2014–2017 only started delivering notable DPI around 2020–2021 (years 6–7+), once their investments hit maturity and the exit window opened. Beezer Clarkson of Sapphire Partners notes that historically it takes ~8 years for a fund to reach 1.0x DPIthevcfactory.com – this held true for many Israeli funds, perhaps even longer for purely seed vehicles. The key pattern is the J-curve effect: initial negative/low returns, then a sharp upturn if/when big exits occurthevcfactory.com. LPs need to be financially (and psychologically) ready for several years of no distributions, followed by potentially large distributions clustering in a short span. Importantly, interim DPI is not a reliable predictor of final performance – some funds can look poor early and still win big later. Conversely, an early DPI pop isn’t a guarantee of ultimate success.

  • Early DPI vs. Final Multiples: A corollary of the above is the cautionary tale that early DPI can mislead. As one VC analysis showed, the fund with the highest DPI at year 5 (1.28x) ended up with a good-but-not-spectacular 2.55x final DPI, whereas another fund that had 0 DPI at year 5 eventually achieved 12.3x DPIthevcfactory.com. For LPs, this means two things: (1) Don’t write off a fund just because it hasn’t distributed cash in the first few years – many great funds have zero DPI until a breakout exit in year 7 or 8. (2) Conversely, if a fund does return a chunk of capital early (say via a quick sale), that’s positive, but it doesn’t guarantee the fund will be a top-quartile performer overall. It might simply mean the manager took an early exit opportunity. Strategy matters: some managers aim to return some capital early (de-risking via secondaries or early M&A), while others hold longer for bigger outcomes. LPs should align such strategies with their liquidity needs. In Israeli VC, we’ve seen examples of both – e.g., some funds sold secondary positions in 2021 (boosting DPI) whereas others doubled down. Each approach has risk: selling early can cap upside, holding can mean no DPI if markets turn. A balanced viewpoint for LPs is to evaluate DPI alongside TVPI (total value) and portfolio health, rather than in isolation at mid-point.

  • Market Cyclicality and Macro Risks: The Israeli tech exit cycle of 2019–2023 vividly demonstrated that macro conditions directly impact DPI timing. LPs should recognize that venture returns are highly cyclical. A frothy market (low interest rates, high appetite for tech IPOs) will open the DPI spigot – as in 2021, when many funds distributed sizable gains after IPO lock-ups expired. In contrast, downturns or crises slam that spigot shut – as seen in 2022–2023 with interest rate hikes and global market corrections, and further exacerbated in Israel by domestic turmoil (2023’s war and political strife). The 2022 PwC report noted how inflation, rising rates, and war led to investors and founders sitting on the sidelines, sharply reducing exitstimesofisrael.com. LPs, therefore, face timing risk: if your fund’s exit years coincide with a bear market, DPI will be delayed (or even impaired if valuations reset lower). Geopolitical factors can especially affect Israel (e.g. conflict impacts on Q4 2023 exitstimesofisrael.com), adding another layer of uncertainty. Mitigating this risk as an LP involves building a portfolio of funds across vintages. By staggering commitments, one increases the chance of having some funds mature in bull markets. Additionally, LPs should inquire about how managers plan for downturns – do they have reserves to sustain companies longer, will they push for early exits, etc. The recent pattern suggests that liquidity can vanish for years (e.g. 2022–2023) so funds need the resilience to ride through and still be around to exit later.

  • Concentration and “Home Run” Dependency: Early-stage returns are famously skewed – one or two exits often account for the majority of a fund’s DPI. The Israeli VC experience underscores this. Many funds’ DPI success hinged on a single “home run”: e.g., Aleph’s Lemonade IPO, or Vintage Investment Partners (a secondary fund) getting a big exit via ironSource, etc. The Israel Innovation Authority has observed that 20% of funds generate 80% of industry profitsoecd.org – and within those funds, often a handful of investments generate the bulk of the DPI. For LPs, this means manager selection is critical (you want to be in those 20% of funds) but also that even in a good fund, your outcome might rely on a couple of companies. This introduces risk – if those few expected winners stumble, DPI will disappoint. We saw an example: some Israeli funds counted a lot on unicorns like Wework or Lemonade. Those did go public, but post-IPO performance tanked – Wework’s valuation imploded, Lemonade lost ~90% from its peaken.wikipedia.org. A fund that didn’t sell in time would see its paper gains evaporate and DPI potential shrink. LP takeaway: be mindful of concentration risk. A fund with DPI heavily from one exit can be great if that exit is solid (cash in hand), but if it’s mainly stock distributed and that stock crashes, the LP’s actual money returned may be far less. Encourage managers to prudently distribute public shares or take some money off the table when possible. As one example, an Israeli fund distributed shares of an IPO to LPs at peak prices in 2021 – those LPs could choose to sell and lock in returns. Others held, hoping for further upside, and were left with far lower values by 2023. Thus, DPI timing and distribution policy can materially affect LP outcomes.

  • Fee Drag and Recycling: Another subtle pattern affecting DPI is how managers handle fees and recycling. Early-stage funds often recycle early returns (reinvest small exits to increase total investment). While this can boost final TVPI, it delays DPI (cash is not distributed but reused). Israeli funds are no exception – many have recycling provisions up to, say, 120% of fund size. LPs might not see distributions until after that hurdle. Additionally, management fees and expenses in the early years mean DPI starts negative (since fees are paid out of called capital). Over 5+ years, fees can consume a chunk of early proceeds. In a market with few exits (like 2022–2023), any small wins might be swallowed by fees unless they are significant. LPs should monitor how much of paid-in capital has gone to fees versus returned from investments; a fund returning 0.2x DPI but having charged 0.1x in fees net of recycle might effectively only have broken even in cash terms for LPs so far. This isn’t abnormal, but it reinforces planning for longer payback periods.

  • Alignment and Secondary Sales: One risk (and opportunity) for LPs is the use of secondary markets. Israel’s hot market in 2021 led to a flurry of secondary share sales (founders and VCs selling some stake pre-IPO). Funds that sold secondaries in late-stage rounds could distribute those proceeds, boosting DPI without a full exit. This can be good (early liquidity) but also might indicate the fund trimming exposure. For LPs, the question is whether a manager is proactively taking some chips off the table during boom times. The “distribution crisis” discussion in venture circles notes that many funds had high TVPIs in 2021 but low DPI – they hadn’t actually realized gainsequitybee.com. Some Israeli VCs did start distributing earlier (especially after seeing 2000 and 2008 cycles). LPs may favor managers who have a clear DPI strategy – e.g., distribute what you can when you can, rather than endlessly holding for maximum theoretical upside. The past 5 years showed why: those who waited for even higher valuations sometimes missed the window to distribute at all.


In conclusion, LPs allocating to early-stage Israeli funds should be prepared for a long game, marked by periods of rapid DPI acceleration when exits flood in, and intervening lulls when little cash comes back. The trends from 2019–2023 highlight the importance of backing high-quality managers (who can find the winners and navigate cycles), maintaining patience during lean years, and understanding the context behind the DPI numbers. Israeli tech has proven it can generate huge exits – and thus excellent DPI for investors – but the timing is unpredictable. By diversifying across multiple fund vintages, sectors, and strategies, LPs can smooth some volatility. Ultimately, a nuanced approach is key: celebrate outsized DPI in boom times but don’t over-index on one good year, and conversely, remain calm in drought years knowing the next wave of distributions can arrive with the next startup nation success story. With Israel’s innovation ecosystem continuing to mature (and after a current rebound in exits anticipated in 2025timesofisrael.com), the coming years may yet reward those LPs who stayed the course through the recent downturn, as the cycle turns once more in favor of liquidity and DPI growth.



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