Auditors & Fair Value: A Changing Landscape for VC Portfolios

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 sufficient (and arguably never was).

Instead, there’s a growing emphasis on methodology, calibration, and thoughtful allocation across complex cap tables.

🔍 Calibration is key as IPEV highlights:

“The Fair Value indicated by a recent transaction… is used to calibrate inputs… The Price of a Recent Investment should not be considered a standalone Valuation Technique.” (Dec 2025, p.38)

In other words, the last round is a starting point - not the answer.

📊 Cap table complexity requires better tools With multiple share classes, liquidation preferences, and participation rights, we’re seeing more consistent use of:

• PWERM (Probability-Weighted Expected Return Method)

• OPM (Option Pricing Method)

• Hybrid approaches

• CVM - but only in very specific circumstances

As IPEV notes:

“These methods… allocate value to the various classes of equity… considering either distinct scenarios or a continuous distribution of outcomes.” (p.40)

And importantly on CVM: 👉 The December 2025 update tightened the language — clarifying that CVM is appropriate only when an exit transaction is imminent, not simply expected in the “near future.”

That tightening is subtle, but it has real implications for how (and how often) CVM can be applied in practice.

🚀 Early-stage valuations require milestone thinking For seed and growth companies, Fair Value isn’t just about financials — it’s about progress.

“A set of agreed milestones… are likely to include…” “The Valuer attempts to assess whether there is an indication of change in Fair Value…”(p.44–45)

This makes ongoing assessment, not just event-driven updates, increasingly important.

 💬 Why this matters for auditors

The auditor’s role is evolving from a reviewer of valuations to a trusted guide, helping clients navigate fair value complexities while ensuring methodologies and calculations align with IPEV best practices.

That’s not trivial:

• Models are more complex

• Inputs require judgment

• Outputs depend heavily on structure and scenario design

🤝 Let’s talk

We at VCM have been working closely on these topics — from calibration frameworks to OPM/PWERM implementation, milestone assessments, and cost-effective valuation support.

If you’re navigating these challenges (or seeing them come up more frequently in your audits), happy to have an open conversation.

No pressure - just sharing perspectives and helping make this easier for everyone involved.