When Is a “Mark” Not a Mark? (Valuing Venture Capital Investments)
If you ever wanted technical detail on valuation of venture capital investments, this article has it all. Andreessen Horowitz takes the WSJ to task for their inappropriate use of terminology – specifically their use of the word “mark” – and goes on to explain in (warning!) some detail how VCs value firms in their portfolio.
The WSJ wrote a story today on venture capital returns that makes for great headlines but misses the “mark” (pun intended) on how venture capital performance actually works….
A “mark” is a point in time accounting estimate that often varies by firm and does nothing to tell an LP what a company’s ultimate value at exit will be. Cash or stock actually realized and distributed to LPs is the only real, non-manipulable measure of a firm’s interim success.
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