Metrics & Performance
Book Value
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Quick Answer
The carrying value of a portfolio investment on a fund's books — usually the last round valuation or a write-down if performance has deteriorated.
What it is
Book value (or carrying value) is the value at which a VC fund records a portfolio investment on its books. VC funds mark their investments to market using the most recent round price as the primary valuation anchor (fair value accounting per ASC 820). If a portfolio company raises a new round at a higher valuation, the fund marks up its holding. If performance deteriorates or a round is raised at a lower price, the fund takes a write-down. For unrealized investments with no recent transaction, GPs may use other fair value techniques (comparable company multiples, DCF). Book values are used to calculate TVPI and NAV — they represent paper gains until an actual exit crystalizes real returns.
In Practice
Atlas Ventures invested $3M in TechFlow's Series A at a $15M pre-money valuation, receiving a 16.7% stake. TechFlow's book value on Atlas's portfolio remains at $18M post-money valuation for the next 18 months. However, when TechFlow struggles to hit revenue targets and burns through cash faster than expected, Atlas writes down the investment to $8M book value in their quarterly LP report. This write-down reflects the realistic expectation that TechFlow's next round will likely happen at a lower valuation, even though no actual transaction has occurred yet.
Operational context
What good looks like
The term is tied to a real workflow, not just a definition.
Ownership, timing, and evidence are clear.
The reader can tell what decision the concept supports.
Related terms point to the next useful explanation.
Why It Matters
Book value directly impacts fund performance metrics that LPs scrutinize, including IRR calculations and fund valuation reports. For founders, understanding how VCs mark investments helps explain why some investors become less supportive after missing milestones—their internal book value has likely declined. Significant write-downs can also trigger difficult conversations about bridge financing, down rounds, or strategic alternatives, making book value a leading indicator of investor sentiment.
VC Beast Take
Most founders obsess over the last round's valuation, but savvy entrepreneurs track their book value across investor portfolios. When your book value drops below your last round price, expect tougher term sheets and more protective provisions. The smart move? Proactively communicate progress and setbacks before quarterly LP reports force investors to mark you down.
Term Family
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Further Reading
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Frequently Asked Questions
What is Book Value in venture capital?
Book value (or carrying value) is the value at which a VC fund records a portfolio investment on its books. VC funds mark their investments to market using the most recent round price as the primary valuation anchor (fair value accounting per ASC 820).
Why is Book Value important for startups?
Understanding Book Value is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Book Value fall under in VC?
Book Value falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
Sources & References
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