Can a venture firm's reported portfolio marks be trusted?

Harry Stebbings · Jan 30, 2023

Investors are not marking their books down; they are holding positions at inflated prices and claiming those marks are still valid

38:07 20VC: Homebrew's Hunter Walk and Satya Patel on Why $100M is Not Enough To Execute a Seed Strategy Today | Why They Decided not to Raise New External Funds | Where Are We in the Cycle & What is Truly F***** | Why Founders Should Take Secondaries Earlier

Woody Marshall · Oct 11, 2023

Any firm with a methodical valuation process should already have its private marks moved to market, and those still holding 2021 multiples are living in the past

You just have to look at the public markets to know the multiples changed, regardless of whether the company is still performing

Scope: as much as private marks can track market

36:14 20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Jeff Seibert · Nov 22, 2023

Book values on private startups are not trustworthy — many are held at 2021 marks nowhere close to reality

Secondary market data he receives shows some trading down as much as 80% versus their last preferred round

40:29 20VC: Why OpenAI Will Become an Infrastructure Play, Why Apple Will Win in an AI World, Why Google is the Most Vulnerable Incumbent, Will LLMs Be Commoditised, Which Startups Are Thin vs Thick Wrappers on Top of LLMs with Jeff Seibert, Founder @ Digits

Miles Dieffenbach · Aug 4, 2025

A manager still marking OpenAI at $13BN in 2023 reflected an indefensible valuation policy

The mark was so far off reality that when challenged the firm agreed to revise both its valuation policy and the mark

82:52 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Woody Marshall · Oct 11, 2023

There is a real incentive misalignment in resetting valuations, with LPs waiting for shoes to drop and different investors carrying the same company at different prices

Until everyone is at a fair price and on the same side of the table, some holders will fight for outcomes that suit their short-term mark rather than the company's long-term interest

18:48 20VC Roundtable: Are IPOs Back? Is Growth Dead? What Does it Take to Raise a Growth Round Today? How Do VCs Solve The Liquidity Challenge? Will We See a Massive Resetting of Valuations? AI Hype Growth Rounds?

Beezer Clarkson · Oct 18, 2023

Managers value comparable companies materially differently from one another, and any LP with a broad venture book will see this

Scope: everyone shares book value; the divergence is in how companies are valued

28:47 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Beezer Clarkson · Oct 18, 2023 · hedged

At the end of 2022, auditors were telling GPs to talk to each other to figure out how to value companies

Without a close public comp, the required method was the last round price, which raised questions when a company had raised three times in 2021 at 100x revenue without commensurate growth

Scope: explicitly flagged as rumor and hearsay

29:28 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Harry Stebbings · Oct 18, 2023

The disparity in how GPs report the same companies' valuations is enormous

20VC collects track records from every GP; one company was held at $6B in one book and sold for about $300M the next week

29:55 20VC: Are LPs Open For Business? What Does it Take to Raise a Fund Today? How Has What LPs Want to See in Fund Investments Changed? Why Do LP Incentive Mechanisms Need to Change? Which Funds Will be Hit Hardest with Beezer Clarkson @ Sapphire Partners

Harry Stebbings · Nov 30, 2022

Zombie companies are not an existential crisis for VCs because the situation can be hidden from LPs by saying the company is figuring it out and has lots of runway

28:11 20VC: Jason Lemkin on Why Founders Do Not Care About Their VCs Anymore, Why Zoom Made Us All Worse Investors, Why 80-90% IRR Should Have Been Warning Signs and the Algolia Journey From Seed to $2.25BN Valuation

Mark Suster · May 1, 2024

The mega-check-at-inflated-valuation model produced zombie companies that cannot be cleaned up, and investors have simply walked away from them

A $300M check at a $4B valuation lets the founder take $20–50M off the table knowing the company will never be worth $4B; employees eventually figure it out and leave, deepening the problem

Scope: valuation figures given as illustrative; not a judgment that the investors are bad people or unintelligent

29:33 20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?

Harry Stebbings · Jan 6, 2025 · hedged

Most companies that raised $100M+ rounds at billion-dollar-plus valuations without product market fit will not clear their preference stack, but with years of runway they will just keep going while GPs tell LPs it's fine

47:09 20VC: How To Do a 10x Seed Fund in 2025 | Three Frameworks to Evaluate Startups an Founders | Lessons from Losing Billions Missing Airbnb and Pinterest & Investing Lessons from Charlie Munger with Mike Maples @ Floodgate

Harry Stebbings · Aug 23, 2023

Many current venture marks are not directionally correct — companies at $50-60M ARR are still carried at $1.4-1.7B — and cutting them in half is a severe markdown rather than a directional correction

Fund values should move up and down with the market, but a 50% cut is a different order of magnitude than a directional adjustment

Scope: not arguing for marking to zero

26:02 20VC: NEW FORMAT: Mega Funds Will Come Back, Why Markups Have Corrupted VC, Why RIFs Should Always Be An Embarrassment To SaaS Founders and Why Pitching is BS and Fake with Jason Lemkin and Rick Zullo

Harry Stebbings · Jun 16, 2025

The big returns managers publicly tout diverge sharply from their real numbers

He and Larry have both seen the actual figures behind the marketed ones

36:44 20VC: How We Made $800M on Coursera | We Lost Money on Uber and Made Money on Lyft | We Did 3x on Postmates in 18 Months | DPI is King, MOIC is BS | We Dodged Theranos and I Still Lost Millions with Larry Aschebrook @ G Squared

Harry Stebbings · Aug 4, 2025 · hedged

Current marked books are likely worse than even the revised-down expectations — funds people now hope will return 2.5x may not even do that.

Marks were set in a different environment and are still not written down enough.

Scope: framed as his "biggest worry"

20:50 20VC: Inside Carnegie Mellon's $4BN Endowment | Why 90% of LPs Shouldn't Invest in VC | The $140BN Problem with Multi-Stage Funds | The Hidden Math Behind DPI, TVPI, and Illiquidity with Miles Dieffenbach

Mark Suster · May 1, 2024 · hedged

Most managers are not taking the markdowns they need to take; only firms that never have to think about fundraising or that never bought into the hype have clean books

Firms like Sequoia and Accel don't need to fundraise so they mark down immediately, and funds that avoided the irrational rounds have less far to fall; everyone else has an incentive to hold inflated marks — e.g. a company valued at $8.5B reportedly selling for $300M being carried at $5–6B

Scope: "I think"; not a judgment on the quality of any individual deal

32:30 20VC: Mark Suster on The Biggest Fundraising Lessons for VCs, Why the Correction in Venture is Still to Come, Why Private Equity Will Replace IPOs and M&A as the Exit Path & The Woke Left and a Trump Administration; What Happens?

Harry Stebbings · May 8, 2024

Nobody in the venture ecosystem is incentivized to stop the mark-up flywheel, because some LPs pay bonuses on TVPI and managers need the marks to raise new funds

Incentives drive outcomes, and every participant's incentives point toward keeping marks high

10:20 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber

Tom Hulme · May 8, 2024

LPs have not pressured GPs to mark portfolios closer to market, contrary to his expectation, because those LPs are themselves reporting to their own LPs and propagate the same story

The reporting chain means each layer benefits from the optimistic marks being passed upward

Scope: he admits he didn't see this coming

10:34 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber

Tom Hulme · May 8, 2024

Priced rounds have become less common in favour of convertible notes largely because VCs report TVPI marked off the most recent round, so avoiding a priced round lets them defer a markdown and claim portfolio values that may not be true

With public comps down 80%, a priced round would force the markdown; a note kicks the pricing decision down the road

Scope: one of several reasons, described as a main one

9:23 20VC: GV's Tom Hulme on Why Investing in Foundation Models is like Investing in "Power Stations", The Conventional Wisdom in VC that is BS & Lessons from a 24x Angel Track Record, 255x on Robinhood and Making Billions on Uber

Harry Stebbings · May 27, 2024

Investors use structured rounds and flat rounds to hide how badly a company is doing and to avoid marking it down in their books

40:04 20VC: Why Seed is Systemically Broken | Why Pricing is Worse Than Ever and There is More Funding Than Ever | Benchmarks for Churn, Retention and Growth Rates - Good vs Great | Why Last Vintage for Private Equity Will Suck with Jason Lemkin

Logan Bartlett · Aug 29, 2022

Whether marks should come down is primarily a function of stage — early-stage Series A positions may even deserve write-ups on performance, while late-stage companies held at last-round price are being valued superficially

A Series A company that has 15x'd in eighteen months has genuinely appreciated, whereas late-stage holdings can be benchmarked against public comparables today

Scope: applies to a handful of late-stage businesses

23:47 20VC: Is Now Really the Best Time to Be Investing? WTF is Happening at Growth Stage Investing? Why VCs Have Gotten Lazy Over the Last 2 Years? Investing Lessons from Hitting with Braze and Missing with Snowflake with Logan Bartlett, Managing Director @ Re

Semil Shah · Nov 21, 2022

There is no consensus on how much portfolios should be remarked, and the right approach depends on portfolio mix: seed managers should pick a methodology and stick to it, while growth funds should comp company by company against public comparables

At seed you genuinely don't know the value yet, whereas growth-stage companies all have product-market fit and larger checks so public comps apply

Scope: based on conversations with many LPs and GPs

53:40 20VC: Semil Shah on The Biggest Mistakes VCs and LPs Made Over the Last 24 Months, Why LP Churn is Coming, Core Lessons on Scaling from $1M Haystack Fund I to Today and How To Find, Win and Manage LPs as an Emerging Manager

Jake Gibson · Jul 14, 2023

There is still a large unresolved overhang of valuations and a severe markdown is still coming that people are underestimating

Growth investors whose companies went public via PIPE/IPO and then fell have stopped investing, and companies that raised more money are quietly taking on immense amounts of structure that isn't visible

43:26 20VC: Why Fund Sizes Should Be Smaller, Should Founders Also Have Their Own Funds, Is Emerging Markets Investing Gone, Is Fintech Investing Dead & Who Will Be The Winners and Losers in VC in the Next 10 Years with Sheel Mohnot, Co-Founder @ BTV

Michael Eisenberg · Jun 19, 2024

There will be many more Pluralsight-style write-downs to zero, in both PE and newer venture portfolios; it is already happening, we just don't know about it yet

33:52 20VC: Foundation Models are the Fastest Depreciating Asset in History, Lina Kahn is a Threat to American Capitalism, PE is Not Coming to Save the M&A Market & How China Could Overtake the US in the AI Race with Michael Eisenberg

Hunter Walk · Jan 30, 2023

Funds should keep three separate sets of books — LP reporting marks driven only by financings or radical trajectory changes, a sensitivity model for reserves, and actual distributions — rather than trying to mark to a true value

Nobody can say precisely what these companies are worth today — if you could, you'd do that as a business — so reporting marks are arbitrary; sensitivity analysis is where you stress-test valuations and let that drive buying and selling

38:22 Funds should separate lp reporting marks sensitivity models and distributions rather than attempt a single true value

Jason Lemkin · Jan 4, 2024 · hedged

Most GPs have not aggressively marked down their portfolios, but it matters less than people think because LPs have moved past paper valuations to judging the underlying business

The marking system is asymmetric — VCs aren't allowed to mark up between rounds the way PE and late-stage firms can — and his own LPs didn't care much about markdowns

54:17 Markdown avoidance matters less since lps now judge the underlying business not paper marks

Brad Gerstner · Oct 10, 2022

Managers should not mark books up or down in step with the NASDAQ; marks should change only when facts change, new rounds or down rounds intervene

If you wanted marks that track the index you could just hold public exposure and mark it daily; private marks should reflect company facts, and what matters is having a clear expectation set with LPs

29:46 Marks should change only with company facts not track the nasdaq

Jason Lemkin · Aug 23, 2023

His top LPs said they do not want huge markdowns and only need marks to be directionally correct, so long as valuations weren't crazy Tiger- or SoftBank-style rounds

A small fund isn't a material enough commitment for large LPs to worry about

24:36 Lps want directionally correct marks not huge markdowns for smaller funds

Jason Lemkin · Aug 23, 2023

A $50M ARR company last priced at $1.7B should simply be marked down by half, not to zero

15x $50M ARR is about $750M for a good business; you only mark to zero if it runs out of money

26:17 Mark down by half to reflect realistic multiple not to zero

Jason Lemkin · Aug 23, 2023

The way markups are done, especially at smaller funds, has completely corrupted venture, and the industry would be better with no markups at all or with conservative Black-Scholes valuation instead

Markups created an incentive to overfund companies and raise too many rounds at too-high valuations; nobody cared about leaving room for proper exits when a markup gave them a 5x fund and a new fundraise

26:41 Markup system incentivizes overfunding industry better without markups or with conservative valuation

Deven Parekh · Oct 11, 2023

Most of our 2021 mistakes are already marked down substantially, so a down follow-on round or a lower public price won't be a surprise internally

The marks have already been taken, so the news is already internalized

35:45 Proactively marking down 2021 vintage investments early avoids surprise later

Oren Zeev · Feb 2, 2026

Whether a VC's reported marks can be believed depends far more on the GP's motivation and character than on their valuation methodology

Any methodology can be used to inflate; a fund confident it can always raise (like Sequoia) has zero incentive to inflate, while a middle-of-the-road fund unsure of its next raise will find excuses to keep marks up

33:41 Trust depends on gp incentive and character not methodology

Beezer Clarkson · Oct 18, 2023 · hedged

GPs forget they can simply ask their LPs what they think — including how other managers are holding the same companies — and would learn valuable information

LPs see the same companies across multiple managers' books and would likely answer if asked

29:03 Gps should proactively ask lps what they think including cross portfolio marks

Beezer Clarkson · Oct 18, 2023 · hedged

Seed managers often hold companies at higher marks than later-stage investors because by Series B or C they only have information rights and lack boardroom-level information

Information asymmetry: seed investors are outside the boardroom by later rounds

30:13 Seed managers mark higher due to lacking boardroom level information by later rounds

Miles Dieffenbach · Aug 4, 2025

Some managers mark their books accurately and some don't; the perennial multistage firms like Accel and Sequoia are the most conservative, holding even strong companies at 20–30% discounts to achievable secondary prices.

They take aggressive discounts on basically all securities regardless of company quality; and since 2021 LPs like Carnegie Mellon underwrite the top 10 company NAVs themselves to judge whether marks are over-, under- or fairly valued.

20:10 Top multistage firms mark conservatively with steep discounts to secondary prices

Marcelo Claure · Jul 31, 2023

The strategy of marking up term sheets and relying on a later investor to pay a higher valuation was a Ponzi scheme, and those caught in it are about to be exposed while great investors thrive

That model made money only from the next round's higher price, which is now unavailable

51:36 Markup reliant strategy is a ponzi scheme about to be exposed