A write-off is the accounting recognition that an investment has no meaningful recoverable value — the final mark when hope of return is gone.

How it works

Venture funds anticipate write-offs — many seed bets return zero. Process:

1. Company winds down or bankruptcy concludes
2. Fund determines no likely distribution to equity
3. Carrying value set to zero (or residual cents)
4. Loss flows to fund performance metrics and LP K-1s where applicable

Partial write-offs happen when funds sell distressed positions for nominal cash or acqui-hire with immaterial proceeds.

Debt write-offs occur when lenders abandon collection after work-out failure. Venture debt write-offs hit both lender returns and founder reputation for future borrowing.

Write-offs differ from write-downs, which reduce but do not eliminate value while turnaround remains possible.

Power-law fund returns assume high write-off rates on losers — DPI comes from a few winners, not portfolio-wide success.

Why it matters

• Founders: Professional wind downs reduce lingering liabilities; ghost companies on cap tables frustrate investors.
• Investors: Honest write-off timing supports LP relationships; zombie marks distort fundraising narratives.

Common mistake

Delaying write-offs for years on dead companies — inflates TVPI and misallocates partner time to hopeless positions.

Related ideas

See also write-down, wind down, and zombie company.