Metrics & Performance
Write-Off
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Quick Answer
A total write-down of a portfolio investment to zero — when a company has failed and the investment is a complete loss.
What it is
A write-off occurs when a VC fund marks a portfolio investment to zero, recognizing a total loss. Companies are written off when they shut down, go through bankruptcy, or are acquired at zero (acqui-hire where equity holders receive nothing). Write-offs are an expected and normal part of venture investing — most VC portfolios have write-offs. What matters is the portfolio-level return, not avoiding write-offs entirely. Experienced LPs evaluate a VC's write-off rate as a signal of portfolio construction discipline. VCs who avoid writing off marginal companies (to protect TVPI optics) while providing bridge capital to 'zombie' companies are doing LPs a disservice. Honest, timely write-offs provide more accurate portfolio valuation and conserve resources for the winners.
In Practice
Bessemer Venture Partners invested $3M in AI startup DataCrunch in 2021 at a $15M post-money valuation. By early 2024, DataCrunch had burned through $8M total funding, lost their key enterprise customer, and couldn't meet payroll. The founding team dissolved the company and returned remaining assets (~$200K) to investors. Bessemer wrote off their entire $3M investment to zero, recognizing it as a complete loss. This write-off immediately reduced their fund's total value and became part of their loss ratio calculations for LP reporting.
Operational context
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Why It Matters
Write-offs are inevitable in venture capital - even top-tier funds expect 20-40% of investments to become total losses. For GPs, write-offs affect fund performance and highlight portfolio management effectiveness to LPs. For founders, understanding that write-offs are part of the venture model helps frame investor relationships - VCs price in complete losses and rely on big winners to generate returns, making the failure stigma less personal than founders often assume.
VC Beast Take
Experienced VCs write off investments faster than newcomers who cling to hope too long. Quick write-offs actually demonstrate good judgment to LPs - it shows you can recognize failure and aren't throwing good money after bad. The best funds celebrate their write-offs at annual meetings as learning experiences.
Term Family
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Further Reading
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Frequently Asked Questions
What is Write-Off in venture capital?
A write-off occurs when a VC fund marks a portfolio investment to zero, recognizing a total loss. Companies are written off when they shut down, go through bankruptcy, or are acquired at zero (acqui-hire where equity holders receive nothing).
Why is Write-Off important for startups?
Understanding Write-Off is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Write-Off fall under in VC?
Write-Off 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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