Most founders, operators, and even many investors understand parts of VC economics: • Dilution • Valuations • Term sheets But the real insight comes from connecting them into one system. At its core, venture economics can be understood as two sets of three: 🔹 1) Cap Table Economics — The Rules of the Game This is where value distribution is defined. 1. Share classes Common vs. Preferred (and the variations in between) 2. Shareholders Founders, investors, employees 3. Rights

Most firms treat fair value as an output. A number to report. But the more interesting question is: What can fair value teach us about our portfolio? When used well, it becomes a lens into the economics of your investments, not just an accounting exercise. It can help answer questions like: • Which investments are most sensitive to assumptions? • Which companies have the widest range of outcomes? • Where is value concentrated today? • Where is uncertainty concentrated? At the

For a long time, compliance of fair value in venture capital, has been viewed as practically too complex and difficult to follow. Not because the standards weren’t clear. Frameworks like IPEV and ASC 820 have long defined what strong fair value looks like. But translating that into a repeatable, portfolio-wide process - across companies with evolving cap tables, SAFEs, convertibles, and layered preferences hasn’t always been straightforward. That’s where things are starting t

Fair value in venture capital evolves throughout the lifecycle of an investment, and so should the valuation methodology. In practice, there are three distinct stages: 🔹 At Investment Valuation is typically anchored to the transaction price, often supported by an OPM back-solver to allocate value across share classes. 🔹 Towards Exit (no expectation of future financing rounds) Dependent on expected time to exit, methodologies range from CVM, OPM, PWERM and Hybrid. 🔹 The “In

A growing number of VC firms are reevaluating how they approach fair value, not because they’ve been doing anything “wrong,” but because the landscape is shifting in ways that make stronger valuation practices both more practical and more valuable. Technology has lowered the cost and complexity, LP expectations are rising, and industry standards are converging. For many firms, it’s becoming worth a closer look. Why It’s Becoming Worth the Effort • Standards are converging tow

🔑 Key Takeaways • VC valuations require a different mindset than PE. Early stage companies behave like options, not steady state businesses. • OPM, PWERM, and (rarely) CVM are the right tools for capturing uncertainty, optionality, probability, and complex capital structures. • Fair value and investment analysis share the same foundations. The same models used for ASC 820 compliance — OPM, PWERM, breakpoints, and probability based waterfalls — are also the backbone of due

Venture capital investments rarely follow a straight, predictable path. Instead, they move through distinct phases—moments where a company’s trajectory, risk profile, and market context shift in ways that require us to rethink fair value. Each stage demands a different lens, because what a market participant would pay (or expect) evolves as uncertainty unfolds. In this series, I’ll explore these valuation moments through the frameworks that guide our industry: IPEV , ASC 820

Founders often view >1x liquidation preferences as aggressive, but from a VC’s perspective, they’re simply a tool — and one that’s used sparingly. Most deals clear at a clean 1x. But in the moments when structure does appear, it’s there for a reason: to balance expected risk when valuation and conviction aren’t perfectly aligned. And here’s the part founders rarely internalize: A 1x return is not a win for a VC. It’s not even neutral. It’s a loss. Returning capital with no u

In startup land, few terms trigger founders more than “multiple liquidation preference.” The moment a VC asks for anything above 1x, the reflexive reaction is often: “They’re being greedy.” But like most things in venture, the reality is more nuanced — and, frankly, more interesting. I want to offer a different lens. Not to defend every term sheet ever written, but to broaden the conversation. Because sometimes a >1x preference isn’t greed at all. It’s information. 🧩 1. A H

Continuing from last week’s post on how to think about Enterprise Value in VC‑type, early‑stage companies, I want to push the conversation a step further and talk about calibration — a concept that sits at the heart of valuation in an ASC 820 / IPEV‑compliant framework. Calibration is one of those ideas that sounds abstract until you actually apply it. But in practice, it’s the discipline that keeps early‑stage valuation from drifting into storytelling. It forces you to anch

1. Early‑stage valuation celebrates what’s possible This is one of the rare places in finance where vision and artistry is a legitimate input. You’re valuing ingenuity, ambition, and the potential to reshape a market, not just the assets that exist today. 2. The absence of traditional metrics is a feature, not a flaw When revenue and profits aren’t yet the story, founders and investors can focus on insight, velocity, and vision. It relies on creativity and strategic clarity w

Over the past few posts, I’ve been unpacking fair value methodologies under IPEV and ASC 820 and how they apply to venture investments. Now feels like the right moment to zoom out and ask the bigger question: what is a company actually worth? More specifically, how should we think about enterprise value across different parts of the investment universe? In public markets and traditional private equity, the answer is almost comfortingly straightforward. These companies typical

1. A solid cap table strengthens every valuation approach 🔍 Whether using OPM, PWERM, or CVM, every method becomes more reliable when it’s built on accurate ownership data. 2. High‑quality inputs unlock high‑quality valuations 📊 Even the most advanced models are only as strong as the data behind them. Reliable valuations depend on clean, complete, and well‑structured information, starting with an accurate, up‑to‑date cap table. Without that, the integrity of the valuation f

I’ve spent a lot of time breaking down how VCs can approach fair value using OPM, PWERM, and CVM. Each methodology has its own logic, assumptions, and ideal use cases. But despite their differences, they all share a single foundational dependency that determines whether the output is meaningful or misleading: If your cap table isn’t accurate, your valuation isn’t accurate. This is the part of valuation work that often gets underestimated. It’s easy to focus on the modeling te

(This post is longer than the previous ones, but because OPM plays such a central role in fair value methodologies, I’m going to be especially thorough here.) As we continue our look at fair value methodologies for VCtype investments under IPEVand ASC 820, one method consistently rises to the top in conversations with practitioners. After more than 50 discussions with VCs, CFOs, controllers, and valuation professionals, the most frequently mentioned — and most frequently misu

Valuing early‑stage companies has always required judgment, but the 2025 IPEV Guidelines sharpen the boundaries around when certain methods could be used. One of the most important updates relates to the Current Value Method (CVM). Historically, IPEV allowed CVM when an exit was expected “in the near future.” The 2025 update tightens this significantly: ⚠️ CVM is now appropriate only when an exit is imminent (IPEV Dec 2025 – Page 41) This is more than a wording change — it’s

As we continue our dive into fair value methodologies, what qualifies, what doesn’t, and how to make sense of it all, PWERM stands out as one of the most approachable tools for venture backed companies working under ASC 820 and IPEV. It’s surprisingly intuitive once you get past the jargon. At its core, PWERM isn’t just about running numbers; it’s about mapping the real paths a startup might take and understanding what each one means for shareholders and fair value. VCs alrea

In previous posts, I’ve focused on what not to use when valuing early‑stage, venture‑backed companies under IPEV and ASC 820. We’ve covered why l ast price per share , cost , and inappropriate use of waterfall allocations often fail to meet fair value requirements, especially when capital structures are complex or when market conditions and company performance have shifted since the last financing. Those approaches may feel intuitive, but they rarely reflect the economics

After digging into the most common valuation shortcuts in venture capital, a few clear truths emerge: 1️⃣ Cost is not fair value Cost is historical. Fair value is current. IPEV and ASC 820 are explicit: once new information exists, holding at cost stops being conservative and starts being misleading. 2️⃣ Last price per share ≠ portfolio truth LPPS reflects one deal, at one point in time. It ignores preferences, protections, optionality, and changes in performance or market

Continuing our mini-series on valuation myths in venture capital, we’ve already looked at cost and last price per share . Now let’s turn to another commonly used approach: the enterprise value (EV) waterfall. At first glance, the waterfall feels logical: start with an enterprise value, then allocate it down the capital structure according to preferences and rights. But here’s the problem: the “EV then waterfall” is not consistent with IPEV or ASC 820 fair value principles (