---
title: "What Is Paper Gain?"
term: "Paper Gain"
description: "A paper gain is an unrealized increase in the value of an investment on paper—marked up in a portfolio or cap table but not yet converted to cash through a sale, IPO, or secondary."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/paper-gain
---

# What Is Paper Gain?

> A paper gain is an unrealized increase in the value of an investment on paper—marked up in a portfolio or cap table but not yet converted to cash through a sale, IPO, or secondary.

A **paper gain** is unrealized appreciation—the value of holdings has risen on paper, but no liquidity event has turned it into spendable cash.

### How it works

After a startup raises at a higher valuation, existing shareholders have a paper gain based on their ownership times the new price per share—unless the round included heavy structure that limits common upside. VC funds mark portfolio companies to fair value each quarter, often following the latest financing. Those markups increase reported NAV and metrics like TVPI, even when the fund has not distributed cash.

Paper gains shrink or disappear if the company raises a down round, struggles, or fails. Public comparables dropping can also force write-downs on private marks.

Secondary transactions can crystallize part of a paper gain for early shareholders while leaving the rest unrealized. Fund marks may lag or lead those private prices depending on ASC 820 policy.

### Why it matters

- **Founders:** Headline valuation creates paper wealth for your equity, but secondary sales and acquisitions determine what you actually receive—and preferences matter.
- **Investors:** LPs distinguish paper gains from DPI. Strong unrealized marks support fundraising stories but do not pay pensions until exits land.

Treat paper marks as provisional until a liquidity event confirms price.

### Common mistake

Treating a paper gain from a preferred-led round as proof common stock is equally valuable at that price. Waterfall math may tell a different story.

Boards should distinguish paper marks from cash returned when reporting progress to shareholders.

### Related ideas

See realized gain, TVPI vs DPI, 409A valuations, and mark-to-market reporting.

## FAQ

### What is a paper gain in simple terms?

It is profit that exists on spreadsheets and markups but not in your bank account. Your company or fund marks holdings higher after a new round or appraisal, but no one has sold yet.

### Why does paper gain matter?

Paper gains drive fund TVPI and founder net-worth narratives, but they can reverse if the next round is down or the market cools. LPs care about DPI—cash returned—not paper alone.


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Source: https://venturecapitaltracker.com/glossary/paper-gain