---
title: "What Is Residual Value?"
term: "Residual Value"
description: "Residual value is the estimated worth of an asset at the end of a lease, loan, or fund life — what remains after depreciation or after other cash flows are paid. In fund reporting, it often refers to remaining unrealized portfolio value."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/residual-value
---

# What Is Residual Value?

> Residual value is the estimated worth of an asset at the end of a lease, loan, or fund life — what remains after depreciation or after other cash flows are paid. In fund reporting, it often refers to remaining unrealized portfolio value.

**Residual value** is the estimated remaining economic value of an asset or portfolio after a defined period — end of lease term, project life, or fund vintage — when earlier cash flows or depreciation are accounted for.

## How it works

In equipment finance, lessors model residual to set payments — if a truck is worth 40% after five years, that salvage value reduces monthly lease cost. In venture fund accounting, **residual value** sometimes describes unrealized holdings: NAV minus distributions, i.e., what is still marked on the books pending exit. [/glossary/realized-value](/glossary/realized-value) plus residual NAV composes total value; TVPI combines both relative to paid-in capital.

Marks on residual holdings move with rounds, comparables, and GP judgment — unlike realized proceeds.

## Why it matters

- **Founders:** Lease residual guarantees can create surprise balloon payments if asset values fall.
- **Investors:** LPs discount stale residual marks in aging funds; DPI proof reduces reliance on residual NAV.
- **Project sponsors:** Overstated residual makes projects look bankable until sale reality bites.

## Common mistake

Treating fund residual NAV as cash LPs can count on tomorrow. Until realization, residual value is estimate-heavy and can markdown sharply.

## Related ideas

[/glossary/realized-value](/glossary/realized-value), [/glossary/paper-gain](/glossary/paper-gain), NAV, TVPI, and salvage value.

## FAQ

### What is residual value in simple terms?

It is what something is expected to be worth later — the leftover value of equipment after a lease ends, or the remaining estimated value of investments still held in a fund.

### Why does residual value matter?

Fund LPs judge performance on cash returned plus residual NAV. Founders in asset-heavy models must justify residual assumptions on leased gear or project exits.


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Source: https://venturecapitaltracker.com/glossary/residual-value