ASC 820, Venture Capital, and Private Equity Valuations
Independent fair value measurements for funds and institutional investors that need accurate, defensible valuations for financial reporting, investor transparency, and audit readiness. Our specialists deliver valuation support grounded in ASC 820 and tailored to the complexities of venture capital and private equity investments.
The Purpose
Fair value measurement is a core requirement for venture capital and private equity funds operating under ASC 820. Portfolio investments must be reported at fair value in US GAAP financial statements, supported by clear assumptions and defensible methodologies that satisfy auditors and limited partners (LPs). When valuations are well-grounded, LPs gain a clearer understanding of portfolio performance and are able to make informed asset allocation decisions.
Most VC- and PE-backed companies lack observable market pricing and carry complex terms that shape economic outcomes. Preferred and common equity, convertible instruments, warrants, and SAFEs each behave differently under various scenarios, which means the valuation must reflect rights and preferences as well as company performance and broader market conditions. With so much depending on unobservable inputs, objectivity becomes essential. An independent valuation helps reduce conflicts of interest and provides the level of documentation auditors expect during review.
ASC 820 applies across venture capital, private equity, growth equity, hedge strategies, and pension funds, requiring periodic fair value estimates that are both consistent and well supported. Strong reporting practices improve transparency for LPs, bring discipline to fund accounting, and streamline annual audit cycles. Key benefits include:
Clear compliance with US GAAP requirements
Greater confidence from LPs and advisory boards
More consistent and reliable capital account reporting
Smoother audit support due to well-documented assumptions and methodologies
Better insight into portfolio performance and risk drivers
Because most early-stage and private companies do not operate in active markets, ASC 820 places particular emphasis on judgment, hierarchy classification, and the use of market-participant assumptions. A third-party valuation reinforces that judgment, helping funds defend their conclusions to auditors, regulators, and investors.
What We Value
Our ASC 820 work covers the full spectrum of securities held by venture capital and private equity funds. Engagements often involve instruments with evolving rights, layered preferences, or performance-linked features that affect how value is realized across different outcomes. We frequently value:
Preferred and common equity issued across multiple rounds
Convertible notes, SAFEs, and other bridge financing structures
Warrants, options, and equity-linked incentives
Securities with complex participation rights, protective terms, or ratchets
Interests involved in secondary transactions or tender offers
Positions with limited market activity or rapidly changing performance indicators
Each valuation reflects the economic design of the security, relevant market-participant assumptions, and the conditions influencing fund-level returns. This ensures the analysis aligns with ASC 820 guidance and captures the realities of how value is expected to materialize for the investor.
The Redwood Advantage
Our fair value work is grounded in technical depth, independence, and clear communication. These qualities are essential for fund managers reporting under ASC 820. We bring extensive experience with venture-backed and private equity-backed companies, along with a strong understanding of complex capital structures and performance-contingent instruments. Our team includes credentialed valuation specialists who work across growth-stage and late-stage businesses, pre-IPO companies, rollups, recapitalizations, and a wide range of industry environments from technology to life sciences.
Each valuation reflects the specific characteristics of the security and the objectives of the fund. Our analyses are built to withstand auditor review and are supported by transparent modeling, well-supported assumptions, and clear documentation. We stay accessible throughout the engagement, support auditor and stakeholder walkthroughs, respond to questions, and help maintain smooth reporting cycles.
FAQ
We’ve helped hundreds of startups and established businesses complete valuations. Here are some common questions.
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Funds must report fair value at each financial reporting date under US GAAP. Many managers perform quarterly valuations, with annual audits requiring complete valuation documentation and model support.
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VC portfolios often require scenario-based modeling, option-pricing methods, and probability-weighted approaches due to uncertainty around outcomes. PE investments more commonly rely on income and market approaches grounded in financial performance and comparable company data. Both require careful evaluation of market-participant assumptions and capital structure rights.
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Classification is based on the observability of inputs. Most private company investments fall under Level III because they rely heavily on unobservable inputs. We document inputs, assumptions, and hierarchy conclusions in alignment with ASC 820 requirements.
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Yes. Many auditors and LPs prefer third-party valuations to ensure objectivity, reduce conflicts of interest, and provide additional support for complex modeling or documentation.
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Typical requests include recent financials, cap tables, rights and preferences, operating projections, investor updates, transaction data, fund ownership details, and any material events since the prior reporting period.
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