How Should Venture Funds Treat Stale Portfolio Valuations?
The IPEV Valuation Guidelines set out best-practice recommendations for private-capital investments reported at fair value. Private investments require a fair-value process, not merely a mechanical carry-forward of cost. Stale marks should be reviewed when new facts become available.
IPEV's 2025 Valuation Guidelines superseded the 2022 edition.
A stale mark becomes more important when it drives fees, reported performance, re-up decisions, or an LP's internal allocation limits. The manager should explain what has changed since the last financing, whether the company met the milestones behind that price, and how comparable public or private companies have moved. The answer may confirm the old mark, but it should not be assumed without review.
No New Round Does Not Mean No New Valuation
A stale valuation should not remain unchanged simply because the company has not raised another round. The fund still needs a fair-value view based on current company results, cash, market comparisons, capital structure, financing risk, and any recent transactions in the shares. The absence of a new price is information. It may mean the company has not needed capital, but it may also mean the company cannot raise at the old price or is delaying a difficult round.
Age Alone Does Not Decide the Mark
| Evidence | What it can show | Caution |
|---|---|---|
| Company performance | Revenue, margin, retention, and cash progress since the round | Growth without cash efficiency may not support the same multiple |
| Public comparisons | How market valuation multiples have moved | Private company size, growth, and liquidity differ |
| Secondary trades | Real buyer and seller price discovery | Share class, size, and seller pressure may affect price |
| New financing terms | Current investor appetite | Structured protection can hide a lower common-equity value |
| Cash runway | How soon the company must return to market | A long runway can delay price discovery without removing risk |
Structured Rounds Need More Work
A company may announce a flat valuation while giving the new investor a senior preference, guaranteed return, or ratchet. The headline price may stay the same even though the economic value of older shares has fallen. The fund should run the proceeds waterfall at several exit values. If the new terms take a larger share of modest exits, the old preferred and common stock may need a different mark even when the price per share looks unchanged.
Use a Consistent Review Trigger
Funds should not wait for bad news to start a valuation review. Time since the last round, missed budgets, material customer changes, management turnover, a new financing plan, or a significant move in public comparisons can all trigger fresh work. Consistency matters across companies. A manager should not mark strong companies quickly and leave weak ones at old prices. LPs should be able to understand when the policy requires a change and what evidence was used.
What LP Reporting Should Show
- Date and terms of the last financing. Not only the headline valuation.
- Current operating evidence: Performance since the round and remaining runway.
- Valuation method: Recent transaction, market comparison, discounted cash flow, or another method.
- Show what happens when key assumptions change.
- Identify who reviewed and approved the mark.
A stale price can be a useful data point. It should not become a substitute for a current valuation judgment.
When a Mark Becomes Stale
Putting numbers around the question makes the trade-off easier to see. A valuation from 24 months ago should usually be challenged more carefully than a valuation from the last quarter, especially if the company has missed plan or the market has repriced.
IPEV's 2025 guidelines aim to support private-capital investments reported at fair value, which means the mark should reflect current evidence rather than convenience.
Adjustment Signals
If public comparable revenue multiples fall from 10x to 6x while the portfolio company misses plan, carrying the old mark without review can overstate unrealized value by a large margin.
Stale valuation review should combine time since last round, company performance, market evidence, and transaction evidence.
Stale Mark Review Model
A stale mark should be retested when time, company evidence, or market evidence changes.
View model data and assumptions
| Treatment | Common evidence | Valuation question |
|---|---|---|
| Carry forward | Recent financing and on-plan execution | Is last round still fair evidence? |
| Recalibrate | Mixed performance or market repricing | What weight should each input receive? |
| Mark down | Missed plan or distressed financing risk | Is the old mark stale? |
Show the Mark and the Downside Case
The important point is to see which input drives the outcome: ownership, price, dilution, reserve capacity, exit value, or timing. A company-level result only matters to LPs after fees, carry, expenses, follow-ons, and the rest of the portfolio are included.
Frequently Asked Questions
Is the last round always fair value?
No: It can be strong evidence when recent and arm's length, but it can become stale as facts change.
Should funds disclose valuation uncertainty?
Often yes: LPs benefit from understanding whether value is based on a recent round, model, public comps, or judgment.
Related Reading
unrealized value reporting, last-round discounts, and MOIC vs IRR.