Private positions are usually marked at the last round price, adjusted for dilution. That mark is an estimate that can lag reality, and only a sale or distribution turns it into cash.
10 min read · Level 5
The distinction between a mark and money is the one I would want every private investor to feel rather than just know. A portfolio marked at twice its cost can return nothing, and the moment you start spending or planning on the marks, you have taken a risk that does not show up anywhere on the statement.
When a private company raises a new round, existing holders often revalue their positions using the new price.
An angel invests 25,000 at a 5,000,000 post-money valuation, owning 0.5%. The company later raises a round that sells 20% at a 20,000,000 post-money valuation.
Ownership after dilution 0.5% x 0.80 = 0.4% Mark at new round 0.4% x 20,000,000 = 80,000 Paper multiple 80,000 / 25,000 = 3.2x
That mark tells you what a recent investor paid per share for a new, usually preferred, security with its own rights. It does not tell you:
What you could sell your shares for today What common shares are worth after preferences Whether the company's position has changed since the round
Marks can stay on the books long after conditions change. A company with a strong last round and three months of runway is still marked at that round's price until something forces a revision, such as a new round at a lower price.
Because paper gains shape behaviour. An investor who counts marks as real money may over-allocate to private assets, delay diversifying, or treat a portfolio as more valuable and less risky than it is.
Marks also tend to lag on the way down. A portfolio that looks stable may include companies whose real value has already fallen.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
An angel's portfolio of eight positions, 25,000 each, 200,000 invested.
Group Positions Marked value Cash returned Marked up after new rounds 3 360,000 0 At cost, no new round 3 75,000 0 Shut down 2 0 0 Total 8 435,000 0
The portfolio shows a 2.2x paper multiple. It has returned nothing in cash. Two of the three marked-up companies have under 9 months of runway; if either raises a down round or fails, a large part of the paper gain disappears. The angel records both figures - marked value and cash returned - and plans on cash.
Treating the value of private positions marked at the last round as money available to spend, reinvest or count toward financial goals.
Record last-round marks as estimates, adjusted for dilution, and keep them separate from cash.
Discount marks mentally for companies with short runway or signs of trouble.
Keep a running total of actual distributions and sale proceeds.
Base financial decisions on money actually received or reasonably certain, not on paper gains.
When valuing a private portfolio, planning finances or deciding whether to invest more in private assets.
Do not dismiss marks entirely. A strong new round is genuine information about progress; the point is to weigh it correctly, not ignore it.
After the 2021 peak in private valuations, many angel investors and funds publicly described large paper gains from late rounds being reduced or erased in 2022 and 2023 as companies raised down rounds, restructured or shut down before any liquidity event.
Until a sale or distribution happens, record gains as estimates and keep planning on cash.
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