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Metrics & Performance

Mark-to-Market

Last updated

Quick Answer

Adjusting the carrying value of portfolio investments to reflect current market prices or estimated fair values.

Mark-to-market (MTM) is the accounting practice of recording assets at their current estimated fair market value rather than historical cost. VC funds mark to market quarterly for LP reporting. When a portfolio company raises a new financing round, the fund 'marks up' (increases) or 'marks down' (decreases) its investment based on the new transaction price. Between financing events, marks may be maintained at the last round price or adjusted using comparable market data. Mark-to-market creates the TVPI (paper performance) numbers that LPs track — but these are estimates, not realized returns. The 2022 market correction forced widespread markdowns as comparables declined, resulting in painful LP reporting that reflected paper losses on previously high valuations.

Further Reading

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Frequently Asked Questions

What is Mark-to-Market in venture capital?

Mark-to-market (MTM) is the accounting practice of recording assets at their current estimated fair market value rather than historical cost. VC funds mark to market quarterly for LP reporting.

Why is Mark-to-Market important for startups?

Understanding Mark-to-Market is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

What category does Mark-to-Market fall under in VC?

Mark-to-Market falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.

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