Metrics & Performance
Fair Value
Last updated
Quick Answer
The estimated market value of an investment, used by VC funds to mark portfolio companies on their books between financing events.
Fair value is the price at which an asset would change hands between a willing buyer and seller, neither under compulsion to act. For VC funds, fair value accounting (ASC 820 in the US) requires marking portfolio investments to their estimated fair value at each reporting period. Between financing rounds, GPs must estimate fair value using observable inputs when available (recent transactions in similar companies, public market comparables) and unobservable inputs when not (DCF models, revenue multiples). Fair value marks drive the TVPI and NAV calculations that LPs rely on to assess fund performance. The challenge: private market fair values are inherently uncertain estimates until a real transaction crystallizes the actual price. This creates opportunities for both conservative and aggressive marking practices.
Related Concepts
Further Reading
50+ Venture Capital Interview Questions by Role (With Sample Answers)
Preparing for a VC interview? Here are 50+ real questions organized by role — Analyst through GP — with sample answer frameworks from people who've been on both sides of the table.
The Screening Call Is Dead: How Async Video Interviews Are Replacing the Most Wasteful Step in Hiring
67% of recruiters spend 30 minutes to 2 hours scheduling each screening call. Async video interviews cut that to zero — and produce better signal. Here's why the screening call is dying.
Side Letter Best Practices for Emerging Managers: What to Grant and What to Avoid
A practical guide to VC side letters for emerging managers: what they are, which provisions are standard, how MFN clauses really work, what to push back on, and how to avoid the most common mistakes that can haunt a fund for its entire life.
What Happens During a Down Round: A Step-by-Step Breakdown
A down round isn't just a bad headline — it's a complex legal and financial event with real consequences for founders, employees, and investors. Here's exactly what happens, step by step.
How to Write an Investment Memo: The VC Template That Actually Works
A practical, partner-ready guide to writing VC investment memos that actually drive decisions: structure, examples, common mistakes, and how top firms like Sequoia, a16z, and Benchmark do it.
Venture Capital Fund Administration: What It Is, Who Does It, and Why It Matters
Fund administration is the operational backbone of every venture fund — handling NAV calculations, capital calls, LP reporting, K-1s, and compliance. Here's what emerging managers need to know before they raise.
Frequently Asked Questions
What is Fair Value in venture capital?
Fair value is the price at which an asset would change hands between a willing buyer and seller, neither under compulsion to act. For VC funds, fair value accounting (ASC 820 in the US) requires marking portfolio investments to their estimated fair value at each reporting period.
Why is Fair Value important for startups?
Understanding Fair 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 Fair Value fall under in VC?
Fair 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.
Newsletter
The VC Beast Brief
Join thousands of founders and investors. Every Tuesday.
The VC Beast Brief
Master VC terminology
Get smarter about venture capital every week. Our newsletter breaks down the terms, concepts, and strategies that matter.
VentureKit
Ready to launch your fund?