Metrics & Performance
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Quick Answer
A reduction in the carrying value of a portfolio investment — typically reflecting poor company performance or a down round financing.
A write-down (or mark-down) occurs when a VC fund reduces the carrying value of a portfolio investment on its books. Triggers for write-downs: the portfolio company raises a new round at a lower valuation (down round), significant negative events (loss of a major customer, executive departure, regulatory problem), comparable public company multiples decline significantly, or the company is clearly failing and liquidation is imminent. Write-downs reduce TVPI and NAV but don't affect DPI (which only includes realized returns). A partial write-down reduces value but retains some mark; a full write-down to zero (write-off) recognizes total loss. Writing down investments proactively — rather than maintaining inflated marks — is a sign of intellectual honesty and builds LP trust.
In Practice
Accel Partners invested $5M in FoodTech startup GreenPlate at a $20M post-money valuation in 2022. By Q4 2023, GreenPlate's revenue growth stalled at 10% annually, key partnerships fell through, and they struggled to raise their Series B. When similar companies were trading at 3x revenue instead of the original 8x multiple, Accel marked down their investment by 60% - from $5M to $2M on their books. This write-down reflected the company's deteriorating fundamentals and reduced exit prospects, even though GreenPlate was still operating and might recover.
What good looks like
Why It Matters
Write-downs directly impact fund performance metrics like IRR and multiple, affecting GP compensation and future fundraising ability. For founders, write-downs signal investor pessimism and make follow-on funding extremely difficult - existing investors won't lead, and new investors see the markdown as a red flag. Understanding write-down triggers helps founders proactively address performance issues before they become permanent valuation scars that follow the company through future rounds.
VC Beast Take
Most founders don't realize write-downs can become self-fulfilling prophecies. Once marked down significantly, even recovering companies struggle with valuation expectations in future rounds. Smart GPs use write-downs strategically - sometimes marking down performing companies to create upside surprise for LPs later.
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A write-down (or mark-down) occurs when a VC fund reduces the carrying value of a portfolio investment on its books. Triggers for write-downs: the portfolio company raises a new round at a lower valuation (down round), significant negative events (loss of a major customer, executive departure,...
Understanding Write-Down is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Write-Down 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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