Metrics & Performance
Fair Value
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.