Comparison
NAV vs Fair Value: Key Differences Explained
NAV (Net Asset Value) is the total value of a fund's assets minus liabilities — the fund-level metric. Fair Value is the estimated worth of an individual portfolio holding. Both are essential to venture fund accounting, but they operate at different levels and are governed by different standards.
What is NAV?
Net Asset Value (NAV) is the total value of a fund's portfolio at a given point in time, net of liabilities. It is calculated by summing the fair values of all portfolio investments, adding cash and receivables, and subtracting fund-level liabilities (management fees payable, expenses, etc.).
NAV is the fund-level metric that LPs use to track their investment value. It determines the basis for calculating TVPI (total value to paid-in capital). As individual portfolio company fair values change — through new financing rounds, write-downs, or write-offs — NAV changes accordingly. Most VC funds report NAV quarterly.
What is Fair Value?
Fair Value is the estimated value of an individual portfolio company holding at a given measurement date. Under ASC 820 (US GAAP), fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants.
For venture portfolios, fair value is typically determined by reference to recent financing rounds (the most common method), comparable company multiples, or option pricing models (OPM) for earlier-stage holdings. Fair value is an estimate — not a realized price — and is subject to significant judgment. Each quarter, fund accountants and auditors must assess whether the last round price still reflects fair value or requires adjustment.
Key Differences
| Feature | NAV | Fair Value |
|---|---|---|
| Level of measurement | Fund-level (total portfolio) | Investment-level (individual company) |
| Calculation | Sum of all fair values minus liabilities | Estimated value of one holding |
| Used by | LPs tracking fund performance; TVPI calculation | Fund accountants; auditors; quarterly reporting |
| Governing standard | Fund LPA and reporting practices | ASC 820 (GAAP) or IFRS 13 |
| Frequency | Reported quarterly or at capital calls/distributions | Assessed and updated quarterly |
When Founders Choose NAV
- →LPs reviewing quarterly fund statements
- →GPs communicating overall fund performance to LPs
- →Calculating TVPI or DPI at the fund level
When Founders Choose Fair Value
- →Determining whether a portfolio company needs a write-down after a down round
- →Auditors reviewing investment valuations
- →GPs marking a position after a new financing round
Example Scenario
A $100M fund has 20 portfolio companies. Each quarter, the fund's accountants assess the fair value of all 20 holdings. Company A just raised a new round at a higher valuation — its fair value increases. Company B's revenue declined significantly — its fair value is written down. The updated fair values of all 20 holdings are summed, cash is added, liabilities subtracted, and the result is the fund's NAV for the quarter.
Common Mistakes
- 1Treating NAV as realized value — it's an estimate until positions are liquidated
- 2Assuming fair value always equals the last round price — marks must be reassessed each quarter
- 3LPs comparing NAVs across funds without accounting for differences in valuation methodology
Which Matters More for Early-Stage Startups?
Both are essential but serve different purposes. GPs need to rigorously assess fair value at the individual company level — it's both a GAAP requirement and an LP trust issue. LPs care most about NAV as the summary of what their investment is worth today. The most important caveat: NAV is unrealized value. DPI (distributions to paid-in) is the only metric that reflects actual cash returned.