VC & PE Glossary
What Is Unrealized Value?
Updated
Definition
Unrealized value is the estimated worth of investments still held — not yet converted to cash through sale, IPO, or distribution to LPs.
Useful for: Founders, Investors
Unrealized value is the carrying amount of assets an investor still holds — equity, warrants, or fund interests — based on current estimates rather than cash received from a closed exit.
How it works
Venture funds call capital from LPs, invest in startups, and mark each position periodically. Until a company is sold or goes public, the fund’s stake has unrealized value, usually tied to the latest priced round, a board-approved 409A, or fair-value guidelines. Add those marks across the portfolio and you get net asset value (NAV) — the unrealized bulk of total value.
When a fund distributes proceeds after an exit, that portion becomes realized. TVPI equals distributions plus NAV divided by paid-in capital — so a 2.0x TVPI might be 0.3x DPI (cash back) and 1.7x still unrealized. Individual founders see the same split on personal cap tables: paper wealth from preferred marks vs cash from secondary sales or acquisition payouts.
Marks can rise on up rounds and fall on flat rounds, down rounds, or public comparables. They are opinions until a buyer sets a price.
Why it matters
- Founders: Investors with large unrealized gains may support follow-ons; heavy unrealized losses trigger reserve debates and tougher terms.
- Investors: LPs distinguish paper from cash when judging GP skill. Reporting emphasizes unrealized value mid-fund; mature funds are judged on DPI.
Common mistake
Treating unrealized NAV as spendable wealth — for funds, LPs cannot rely on marks for liquidity; for founders, illiquid preferred shares are not the same as cash in the bank.
Related ideas
See also total value, TVPI, unrealized IRR, DPI, write-down, and mark-to-market.
Related terms
- Total Value — Total value in fund reporting is the sum of distributed cash and remaining unrealized portfolio value — the numerator in metrics like TVPI before dividing by paid-in capital.
- TVPI — TVPI (total value to paid-in capital) is a fund performance ratio — total value (distributions plus remaining NAV) divided by capital LPs contributed — showing gross multiple before timing.
- Unrealized IRR — Unrealized IRR is an internal rate of return calculated using current portfolio marks and expected future proceeds — not cash actually distributed to investors yet.
Common questions
Short answers for founders, LPs, and operators