If you missed my recent post on fair value for venture-backed companies, here are five essentials you should know about the three core IPEV (ASC 820) valuation methodologies

1️⃣ There are three core methodologies venture valuations rely on Under IPEV and ASC 820, three frameworks dominate fair value analysis for VC-backed companies: PWERM, OPM, and CVM. Each approaches the valuation problem from a different angle and is suited to different circumstances. 2️⃣ PWERM models real exit scenarios The Probability-Weighted Expected Return Method (PWERM) values a company by modeling discrete outcomes, even incorporating future anticipated funding rounds, - IPO, acquisition, or failure each with its own probability and payout. It mirrors how venture investors actually think about risk and potential returns. 3️⃣ OPM treats the cap table like options The Option Pricing Method (OPM) allocates value across share classes using option-theory principles. It’s particularly effective when outcomes are uncertain and the capital structure is complex. 4️⃣ CVM is rarely appropriate The Current Value Method (CVM) simply allocates today’s enterprise value across the cap table as if the company exited today. Under the latest IPEV guidance, it should generally only be used when an exit is truly imminent.  5️⃣ Method selection matters more than many realize Choosing the wrong methodology or misapplying one can lead to valuations that fail to reflect how market participants would actually price the investment today. Importantly, both IPEV and AICPA make it clear that cost or last price per share should not be used. For venture funds, CFOs, and valuation professionals, understanding when each method applies is essential for producing defensible fair value estimates.