What If Your Valuation Process Could Improve your IRR? Fair value is normally seen as a financial reporting exercise. Something that needs to be done for the accounts, the auditors, and the LPs. But perhaps we are missing something. What if the process of determining fair value could actually help VCs make better investment decisions? There are some relatively simple ways of looking at the value of a venture investment: • Cost • Last Price Per Share (LPPS) from the most rece

There's been a lot of noise of late about IPEV-based VC fair value. Although it may seem like a huge effort to take on, at its heart, the idea is relatively simple: Understand the investment, understand what has changed, and use that change as the basis for determining what it is worth today. VCs already possess much of the knowledge needed to do that. They know why they invested. They know the company. They know what needs to go right, what could go wrong, and what has chan

Fair value isn't, and shouldn't be, simply a financial reporting exercise that has to be done. Done properly, it's one of the few structured opportunities a VC has to step back, holistically review an investment, and reassess both the original investment thesis and where that investment may realistically be heading today. By bringing together everything the fund has learned since investing, investors can revisit the core assumptions behind the investment and ask what has chan

When we make a venture investment, we're looking forward. We have a view of what this company could become. What needs to happen. What could go wrong. How big it could get. How long it might take. And ultimately, what a successful outcome could look like. In its simplest form, we're forming a view on three things: The probability, timing and potential size of an exit. Let's call it PTSE™ (trademark pending 😄). There's nothing particularly new about it. In many ways, it's wha

When a venture fund makes an investment, it does not begin with a valuation model; it begins with an assessment of the company. Does this company fit our investment strategy? Do we believe in the management team, the technology and the market? What needs to happen over the next three to five years for this company to succeed? How much additional capital is likely to be required, and where will we sit in the cap table after future rounds? Most importantly, if the company succe

A venture investment is fundamentally a judgment about three things: ✅ The size of a potential liquidity event ✅ The probability of that liquidity event occurring ✅ The likely date of that liquidity event In other words: the Exit. At the time an investment is made, substantial work goes into forming those judgments. The investment team assesses, amongst other things, the founders, technology, product, addressable market, competitive position, customer traction, financial plan

There are two distinct stages in the venture valuation process, and they often involve different players. Stage 1: The Qualitative Assessment - Milestones and Calibration This is primarily the domain of the deal or investment team. They are closest to the company. They attend board meetings, speak with management and receive regular updates. They know what was expected at the time of the last financing and what has actually happened since. This is where milestones and calibra

In a previous article, (linkedin.com - the Hardest Stage in Venture Capital Fair Value) I discussed what I believe is one of the hardest challenges in venture capital fair value: valuing a company that has not raised capital for a considerable period of time. But behind that challenge lies a broader question: What are we actually trying to understand when we value a venture-backed company? At its core, a venture investment is based on a journey. A company starts with an idea

When people talk about valuation, the conversation often jumps straight to methodology. Should we use OPM? PWERM? Calibration to the last financing round? A market approach? But methodology is not where the valuation process starts. In reality, the calculation is one of the final steps. Before you can produce a valuation, you first need to build it. 1. Establish the capital structure Everything begins with reliable, up-to-date investment data. The cap table must accurately re

Before selecting a valuation methodology, building a model, or discussing a valuation conclusion, investors typically need to answer two very different questions: 👉 What do we know about the company? 👉 What do we know about the investment? These may sound similar. In practice, they are completely different information-gathering exercises. 1️⃣ Understanding the Company The first exercise is understanding the company's current circumstances. Questions might include: • Is the

We spend a lot of time discussing the technical side of fair value under IPEV and ASC 820:Calibration, Methodology selection, OPM, PWERM, Waterfalls and Market-participant assumptions. All of these are important. But perhaps it's worth taking a step back. Before deciding how to value an investment, firms first need to manage the valuation process itself. For many VC CFOs and finance teams, quarter-end and year-end valuations are among the most stressful periods of the report

In venture capital, there comes a point where a company has not raised a new funding round for a considerable period of time. It hasn't reached an IPO or an acquisition, there is no recent market transaction to rely on, and yet the fund still has to determine a robust fair value for its investment. This is arguably the most challenging stage in venture capital valuation. The challenge isn't performing the calculations. Modern valuation platforms can do that. The real challeng

One investment. Five valuation approaches. Values from $2.00 million to $4.09 million. Over the past few months, I’ve written extensively about venture capital fair value. We’ve explored valuation methodologies, shareholder rights, breakpoints, waterfalls, calibration, back-solve, OPM, PWERM, CVM, ASC 820, the IPEV Guidelines and AICPA guidance. Each topic is important. But none of them are the end goal. Ultimately, venture capital funds don’t report OPMs, waterfalls or calib

If you're involved in venture fund valuations, you'll probably recognise this. ✅ Someone is checking whether the cap table is up to date. ✅ Someone else is hunting for signed investment documents. ✅ There are questions about rights, SAFEs, convertibles and waterfalls. Then comes the investment review. "Can we still rely on the last funding round?" "Do we need to run a waterfall?" "The auditors mentioned OPM... but is it really necessary this quarter?" "Has there been a signif

Every quarter, venture funds invest significant time and resources into financial reporting • The finance team prepares the accounts. • Auditors review the process. • LP reports are produced. • Governance meetings are held. • Documentation is completed. All of this effort ultimately supports one number: Net Asset Value (NAV) NAV influences: • LP reporting • Financial statements • Fund economics • Investor confidence It is arguably the single most important financial number a

Making Institutional-Quality Venture Fair Value Practical and Achievable - Without Making It Less Rigorous Venture Capital Is Entering a New Era Venture capital is entering a new era of accountability. LPs expect institutional-quality fair value. Auditors expect defensible methodologies. Regulators expect consistency and transparency. Funds increasingly expect to operate with the same sophistication as the institutions they resemble. Yet, for many venture funds, institutional

Most discussions about cap tables focus on accuracy. Does the cap table correctly reflect every financing round? Are all SAFEs, options, warrants, and share issuances captured? Is the ownership ledger complete and up to date? Of course, that matters. But for sophisticated venture investors, fund managers, valuation professionals, and finance teams, cap table accuracy is not the end goal. It is merely the starting point. The real objective is ensuring that the waterfall is acc

Over the past year, we’ve seen a clear shift in expectations around how Fair Value is assessed for venture-backed investments and auditors are increasingly at the center of helping clients navigate this complexity. The latest December 2025 IPEV Guidelines reinforce something many of us have been discussing for a while: headline valuation ≠ Fair Value. Simply taking last price per share × number of shares held - regardless of share class rights and preferences is no longer suf

A cap table isn’t just a record of today. It’s a model of what a company can become. For VCs, that model underpins everything: • capital invested at entry • dilution across future rounds • reserve strategy • and ultimately — fund IRR |The best investors don’t just review a cap table. They actively use it as an analytical tool. They expand it forward. They model: • multiple potential financing paths (up rounds, flat rounds, down rounds) • different participation decisions and

One of the realities in venture valuation is this: Most firms don’t follow IPEV or ASC 820 in a fully “by-the-book” sense. Not because they disagree with the guidance, but because in practice, applying it rigorously can feel disproportionate to the pace and uncertainty of venture investing. So, what happens instead? Fair value often leans on practical, straightforward approaches: • Recent transaction prices • Waterfall-based allocations • Selective updates between financing e