marking to market

Definition

The practice of revaluing portfolio companies to reflect current fair market value rather than cost basis, theoretically providing accurate fund performance but practically involving educated guesses and wishful thinking. Quarterly existential crisis as an accounting process.

Example Usage

After the latest funding round, we're marking that portfolio company to market at 2.5x our original investment price.

Origin

Accounting terminology from securities markets adapted to venture capital valuation practices

Fun Fact

Private company markups are notoriously optimistic during bull markets and lag reality during downturns since there's no objective daily price like public stocks.

Source: Accounting and venture capital valuation practices

Related Terms

Advanced

down dilution

The reduction in ownership percentage when additional shares are issued, especially painful in a down round where new shares are issued at a lower price. Watching your equity stake shrink while your company's value simultaneously decreases.

🚀 Startup / VC

Beginner

transaction

Any exchange of goods, services, or money, elevated to sound more important when preceded by 'business' or followed by 'cost.' In startup world, it's the holy grail metric that proves people are actually using your product for its intended purpose rather than just kicking the tires. VCs obsess over transaction volume, transaction value, and transaction frequency as if counting exchanges of value will somehow predict the future.

🚀 Startup / VC

Advanced

Equity Dilution

The process by which your ownership percentage shrinks with each funding round until you own approximately as much of your company as you own of the Pacific Ocean. It's like splitting a pizza with more and more people, except you baked the pizza and now you get one olive.

🚀 Startup / VC

Advanced

synthetic exit

Restructuring that gives early investors and employees liquidity without selling the company, like a pressure release valve for cap table tension. An exit without the exit.

🚀 Startup / VC

Beginner

Stealth Mode

When a startup operates in secrecy to avoid competitors copying their idea, which assumes competitors would care about the idea in the first place. It's the startup equivalent of whispering at a party where nobody is listening.

🚀 Startup / VC

Intermediate

lever

A mechanical advantage device that pivots on a fulcrum to multiply force, or in startup parlance, anything you can use to do more with less. Every MBA in Silicon Valley thinks they've found a "lever" to pull, usually right before asking for $5M in seed funding. Physics teachers hate how loosely VCs use this term, but hey, at least someone's paying attention to simple machines.

🚀 Startup / VC

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