The DPI Architect: Designing Liquidity When Exits Stall

Convert TVPI to real DPI with a clean liquidity stack, transparent LP signals, and cash-without-chaos governance

heap debt and easy multiple expansion are not coming to rescue mediocre execution. Fundraising cycles are longer, re-ups are choosier, and LPs want cash, not promises. In this environment the winning posture is architectural, not hopeful. Treat liquidity like you treat underwriting: design it on day 1, operate to it every week, and reach for tools that are clean, auditable, and aligned with long-term value creation.

This guide outlines a practical taxonomy, a build sequence, and the governance habits that let you distribute without gutting growth.

A simple taxonomy: terms in plain English

• TVPI: Total Value to Paid-In. Paper value plus cash returned, divided by cash invested.

• DPI: Distributed to Paid-In. Only the cash returned to LPs divided by cash invested. The scoreboard that pays pensions.

• DPI architect: The PE team that plans liquidity pathways from signing, pairs operating improvements with clean financing options, and paces distributions responsibly.

• Operational alpha: Measurable profit improvement driven by pricing, throughput, mix, working capital, and go-to-market execution.

• Capability deployment: Installing repeatable skills and systems across the portfolio so wins travel and compound.

• Liquidity stack: The menu of routes that convert asset value into cash for LPs when classic M&A timing is uncertain.

• Guardrail vs crutch: A guardrail stabilizes a sound plan. A crutch props up weak performance and hides risk.

The liquidity stack: clean tools for a tougher market

Think of the stack as modular. Use the fewest instruments required, keep incentives aligned, and leave the next buyer a healthy balance sheet and a transparent story.

Continuation vehicle done right

Purpose: provide liquidity to selling LPs while continuing to compound a high-conviction asset.
Keys to “done right”: independent price discovery, clear conflicts process, roll and cash options for LPs, fresh incentive plan tied to new value creation, tight use of proceeds.
When to use: late-stage winners with visible operating momentum but misaligned timing in the exit window.

Structured secondary for the fund

Purpose: give LPs an option to monetize interests in an otherwise strong but slower-moving fund.
Keys: standardized terms, fair allocation rules, clear communication of costs and pricing.
When to use: portfolio has runway yet fundraising or mandate needs a measured DPI pulse.

NAV line as guardrail

Purpose: flexible capital against the portfolio’s net asset value to smooth working capital, fund small accretive moves, or bridge short timing gaps.
Guardrails: modest size, short tenor, strict use-of-proceeds, bright-line policies against masking underperformance, automatic step-down as cash generation improves.
When to use: to protect value during operational work, not to delay it.

Company-level cash routes

Purpose: generate DPI from operating reality, not financial theater.
Tools: receivables programs with clean disclosure, inventory financing on healthy turns, carve-outs of non-core assets, minority sell-downs to strategic partners, royalty or revenue-share capital for specific growth initiatives, dividend recap only when leverage and cash conversion plainly support it.
Rule of thumb: if a tool does not survive buyer diligence, do not use it.

LP trust signals: proof beats pitch

LPs do not need poetry. They need line of sight.

Public playbook
Publish how you create value, the cadence you run, the tools you avoid, and the outcomes you measure. Case studies with baseline and after data build credibility.

Real-time LP view
Offer a simple portal with 5 tiles: distributions to date, near-term distribution outlook, portfolio operating highlights, risk register with owners, and policy notes on use of liquidity tools. Avoid vanity metrics. Update predictably.

Candid communication
State what is working, what is not, and what you are stopping. Explain why a continuation, secondary, or NAV line is the right guardrail now and how you will unwind it.

Distribution pacing: cash without gutting growth

Treat distributions like capital allocation decisions, not impulses.

One North Star and one quarterly goal
Pick the single metric that moves cash fastest in each company. Tie one firm-wide quarterly objective to it. Capacity follows clarity.

Protect the growth flywheel
Set a “protected spend” threshold for proven acquisition channels and retention programs with known ROMI. Fund these before one-off initiatives.

AI as a force multiplier
Use AI where it provably reduces cost or cycle time or raises conversion within 1 to 2 quarters. Examples: collections prioritization, demand forecasting, price guidance, assisted service, and content automation for high-volume ops. Every project needs a named owner, one KPI, and a stop rule.

Short operating loops
Replace annual planning with weekly flash and monthly bridge. Ask the same four questions: what moved, why, what changes next, who owns it. Distribution decisions ride on these loops.

Cash-without-chaos governance

Good governance makes liquidity boring and predictable.

One-page plans
Every portfolio company maintains a single page for value creation, aligned to three levers that change cash or customer behavior. Include owner, three next steps, one number that defines success, and the date.

Board as builder, not audience
Three standing forums:

• Weekly flash: 30 minutes, no slides, only numbers and blockers on orders, price realization, contribution dollars, backlog, AR, AP, turns.

• Monthly bridge: what moved and why, decisions requested, risks with owners.

• Quarterly reset: reprioritize, re-fund, and publish the stop list that frees capacity.

Unified telemetry
Small shared dashboard across the portfolio: forward cash, contribution margin by SKU or cohort, price realization, funnel velocity, output per labor hour, rework or returns. If a tile never changes a decision, delete it.

People plan always on
Liquidity lives or dies on leadership. Track critical seat coverage, time to competence, manager quality signals, and adoption of standard work. Promote from within when possible to reduce execution risk mid-hold.

Red-flag uses to avoid

• Tools used to delay necessary talent or pricing decisions.

• “Transformation theater” that raises debt or burns fees without touching EBITDA or cash conversion.

• NAV lines sized to hide misses or pay distributions forward.

• Continuations without genuine third-party price discovery or with rollover terms that bias the process.

• Distribution bursts that starve proven growth programs with positive unit economics.

• Ambiguous decision rights where no single owner can say yes or no on a liquidity step.

Designing liquidity is not a last-mile scramble. It is a day-1 choice anchored in operating truth. Build a clean stack, show your work in real time, pace distributions off repeatable cash, and keep governance simple enough to run fast. That is how you convert TVPI into DPI without mortgaging tomorrow.

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Notes and source cues

This playbook reflects current market realities: slower exits, higher financing costs, larger dry powder balances, and LP preference for DPI over narratives. It draws on widely reported trends in recent private markets reviews and secondary market analyses, as well as contemporary board governance and liquidity practices observed across buyout and growth equity portfolios.