PE vs VC Valuation: What Fund Managers Need to Know About the Differences 

Published date:  20 March 2025   |  5-Min Read

Valuation is the heartbeat of private market investing—and one of the most scrutinized aspects of fund accounting. Whether you’re managing a private equity (PE) or venture capital (VC) fund, the way you approach valuation directly impacts reporting, investor trust, and regulatory compliance. 

But PE and VC do not speak the same valuation language. Their methods, assumptions, and standards differ based on asset maturity, data availability, and exit visibility. 

In this article, we break down the key differences between PE and VC valuation, explain how fund accountants manage the process, and explore what regulators and LPs expect from modern fund managers. 

Both PE and VC funds adhere to fair value accounting, typically governed by IFRS or US GAAP. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants. 

Since private assets are illiquid and not traded on public markets, mark-to-market becomes a challenge. Fund accountants must use estimation techniques, supported by internal models and external benchmarks, to value portfolio assets at each reporting period. 

The International Private Equity and Venture Capital Valuation (IPEV) guidelines serve as the prevailing industry standard, providing a framework for fair value estimation in alternative asset funds. 

Venture capital portfolios typically consist of early-stage, high-growth startups with little to no revenue and no public comparables. As such, VC valuation often depends on: 

• Last funding round pricing 

• Convertible note or SAFE conversion models 

• Scenario-based forecasts and probability-weighted outcomes 

• Milestone-based adjustments 

Because many early-stage companies lack operating history, VC fund managers rely on qualitative judgments and future potential to drive valuations—introducing more subjectivity and variability. 

In contrast, private equity funds invest in more mature companies where valuation can be anchored in financial performance. Common methods include: 

• Comparable company analysis (trading or transaction multiples) 

• Discounted cash flow (DCF) analysis 

• Recent exit transactions or third-party valuations 

PE fund valuations are typically more grounded in measurable data—EBITDA, margins, market trends and are updated regularly based on actual portfolio performance and liquidity events. 

Valuations in private markets are rarely black and white. Fund accountants play a vital role in: 

• Documenting the methodology and assumptions 

• Applying consistent valuation frameworks across portfolio companies 

• Coordinating with investment teams to gather reliable inputs 

• Flagging material changes or impairment indicators 

• Supporting audits with evidence and model backups 

They must strike a balance between investor transparency and reasonable subjectivity, especially when data is limited. 

Regulators and investors expect consistent, defensible valuation practices. Here’s what they look for: 

• GAAP or IFRS compliance, depending on fund domicile and investor base 

• Alignment with IPEV guidelines 

• Documentation of valuation policies and procedures 

• Audit readiness and traceability of key assumptions 

• Transparent reporting of NAVs and unrealized gains or losses 

Failure to meet these standards can delay fund closing, trigger LP pushback, or raise audit flags. 

Valuation frequency varies by fund type and investor demands: 

• Quarterly valuations are standard for institutional-grade PE and VC funds 

• Annual third-party valuations are often required by LPs or auditors 

• All valuations should include: 

• Methodology used 

• Assumptions and benchmarks 

• Rationale for changes in valuation since prior period 

• Supporting data and model files 

Consistent documentation protects fund managers and accountants from future disputes or audit issues. 

Whether you’re leading a PE buyout fund or a VC seed-stage portfolio, valuation is more than a finance function—it’s a cornerstone of credibility. 

Understanding the differences between PE and VC valuation helps fund managers choose the right tools, apply best practices, and communicate effectively with stakeholders. By aligning with fair value principles, leveraging the right methodologies, and supporting valuations with solid documentation, fund teams can ensure that their NAVs are not just numbers, but reliable reflections of value.