Metricspwmoic

pwMOIC

Also known as Probability-Weighted MOIC, Risk-Adjusted MOIC

Mikael Andersson
Mikael Andersson
VC Analyst · Updated

pwMOIC (probability-weighted MOIC) is the expected return on a venture investment, calculated by multiplying each possible exit multiple by the probability of that scenario occurring and summing the results.

Formula

pwMOIC = Σ (Exit Multiple_i × Probability_i)
Exit Multiple_i
The MOIC in scenario i (e.g., 0x, 3x, 10x, 30x)
Probability_i
The probability that scenario i occurs (probabilities across all scenarios must sum to 1.0)

In depth

pwMOIC blends scenario modeling with traditional MOIC by weighting each potential exit outcome by its likelihood, then summing. Unlike a single base-case MOIC, pwMOIC forces an explicit view on downside, base, and upside paths. That makes cross-deal comparison honest. A 10x base case at 5% probability is not the same as a 3x base case at 60%, and pwMOIC surfaces that gap.

Why it matters

Single-point exit modeling overstates returns by anchoring on the founder's pitch case. pwMOIC forces investment committees to articulate failure modes explicitly, surfaces deals whose base case is alluring but whose probability-adjusted return is mediocre, and enables apples-to-apples ranking across deals with different risk profiles. For pre-seed and seed checks where loss rates exceed 50%, pwMOIC is closer to expected reality than any deterministic projection.

Worked example

A pre-seed company has four modeled scenarios:

ScenarioMultipleProbability
Write-off0x40%
Acqui-hire3x35%
Mid-tier10x20%
Breakout30x5%
pwMOIC = 0×0.40 + 3×0.35 + 10×0.20 + 30×0.05
       = 0 + 1.05 + 2.00 + 1.50
       = 4.55x

A competing deal whose base case is 5x but with 50% loss probability computes to roughly 2.8x. pwMOIC reveals the first deal is the stronger expected bet.

Frequently asked

How is pwMOIC different from regular MOIC?

MOIC reports a single outcome, usually the realized or base-case multiple. pwMOIC weights multiple scenarios by probability and reports the expected value across all possible outcomes, including failure.

What scenario probabilities should I use for early-stage deals?

Empirical pre-seed loss rates run 40-60%, full-loss including acqui-hires closer to 65-75%. Allocate the remainder across base, upside, and breakout cases such that probabilities sum to 1.0. Sensitivity-test the result by shifting probabilities ±10%.

Does pwMOIC account for time value of money?

No. pwMOIC is a probability-weighted multiple, not an IRR. Pair pwMOIC with a probability-weighted IRR or a target hold period to capture time.

Sources & further reading