A current topic among new’ish VCs who invest at early stages of startups – such as wonderful firms we back via Screendoor is rethinking how you communicate portfolio ‘value’ to investors. Historically you would hold your portfolio at the last priced equity round, unless there was a reason to mark it down (concern over its viability/some other negative information) or in rare cases, a reason to mark it up that wasn’t specifically related to a financing (like maybe if they turned down an acquisition offer at $X you could make the case that it’s a credible market signal?). One thing you wouldn’t do is use the cap on a SAFE as a valuation because (a) it’s not equity sale and (b) a cap isn’t a company valuation.

While this might still be ‘proper’ for accounting purposes, a few realities have evolved in recent years which make it a handicap for newer early stage managers to properly demonstrate the strength of their progress to their LPs (existing and prospective). Most notably, seed isn’t a round, it’s a phase, and so you have companies raising multiple tranches of capital over the course of several quarters (or years), and these are often all at notes of different caps. There are typically two versions of this – either the startup needs a little more money to get to the “Series A” (which totally makes sense – it’s hard to forecast exactly what you should raise, especially early on) or the founders are ‘cap maxxing’ where they do rolling closes, raising the note terms to make new investors pay more over a short period of time – sometimes even hours or days (I don’t love this – yes, it’s just the market demand but I think it gets needlessly cute/distracting/bad way to start longterm relationships).

Separately, venture investors have gotten comfortable doing meaningful SAFEs in-between priced rounds post-Series A. LOTS of reasons for this – more competition means being opportunistic to get your first check into a company and/or buying up before the next round (where pro rata might be tight); fund size increases mean the amount you have into a company matters as much as the outcome multiple; big round sizes and high valuations in general make it more possible to get larger sums in-between whereas before those would look like rounds by themselves [eg $15m isn’t a Series B, it’s an A-2 note when you anticipate it’ll help get you to a $50m Series B in a few quarters].

All of this has created an environment where earlier investors don’t always have ‘markups’ to show their LPs because they are waiting longer and longer for a new ‘price’ to be set by an equity sale. The increasingly standard way to communicate this is by adding a column to your financial reporting that’s essentially “SAFE Adjusted TVPI” alongside your more standard TVPI calculations. Note the (a) date of the recent SAFE, (b) the cap/any other terms and (c) the amount of the SAFE. Then use the cap to recalculate the ‘value’ of your ownership stake (or previous note, which technically isn’t yet true ownership), as if the company had completed an equity financing at the valuation cap. This is not accounting/auditor approved and you should not be claiming this as your TVPI in a vacuum without the other information, but it does feel like a fair enough way to chart ‘progress’ in a young portfolio. If you wanted to be really conservative you can also *not* calculate a valuation increase if you feel like a note was ‘strategic’ in purpose or otherwise not representative of the financing market, just be transparent and consistent.

Separate from the SAFE scenario, I’ve had a similar question asked to me by investors who see companies that are likely increasing their enterprise value via fast-growing revenue run rates while using this capital to delay fundraising. That is, why raise more money from investors now if you don’t need it? Just keep building! This is awesome and a very enjoyable trend.

Unfortunately, my advice to VCs here is that while you can certainly emphasize this data in your updates, it’s difficult to ‘price’ the company and you should avoid trying to do so: I see people try to apply ‘market comps’ to suggest where the startup would be valued related to peers – again, this is an interesting exercise to do and perfectly find to share this logic but I wouldn’t build TVPI around it because it’s just too dynamic and approximate an estimation. The exception might be if this is literally your fund strategy – back founders who raise investment capital early and then eschew it for years to come. In those cases, showing your investors that (a) it’s working! and (b) having some agreed upon way to calculate ‘price’ ahead of an exit/financing is a good LPAC/back office/accountants discussion.

Good luck!

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“The game on the field is changing, my competitors are raising bigger funds and so I need to as well.” I hear this from legacy and new VCs all the time. It’s true but insufficient as an operating principle and the fact almost everyone is reacting the same way speaks to the commoditization of capital (as well as the people writing those checks).

Yes startup funding is a marketplace where you need the resources necessary to deliver an attractive product to founders (capital, conviction, support), but for many, thinking about this as just a byproduct of AUM is slow motion regression towards mediocrity (albeit while collecting larger and larger paychecks from fees).

If you’re a VC and feeling pressure from the evolving landscape please start with first principles. Why do you even exist? What’s the playbook you are best suited for and what does it take to execute that strategy with excellence? How much of those resources do you already have? What do you need to acquire? What do you need to shed?

These are questions we ask Screendoor managers as they grow their own firms, and is generally part of our underwriting decision in the first place. Fund size is your strategy but not your reason for existing.

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There’s an old saying that ‘illiquidity in startups’ is a feature, not a bug, because it keeps everyone [founders, team, investors] focused on the longterm outcome. They have a shared incentive and ‘skin in the game’ – whether it be sweat equity or capital equity.

In the year of our lord 2026 this idea seems quaint and outdated. VCs are getting rich off of fees whether they’re any good at their job. Everyone on the cap table can figure out how to monetize private company stock, whether it be via secondaries, SPVs, or forward sales. Your best team members – whether they are fearing the permanent underclass or just out to get theirs – can jump from your startup at any time if there’s a higher NPV option. Basically if they’re any good they have offers.

Some of this is positive for our community, some is not. But doesn’t matter, it’s reality.

Skin in the game is no longer sufficient. Now I look for heart in the game.

The founders who want their companies on their tombstones not just bank accounts and speaker bios. Who won’t ditch their startups for job offers that screw their angels and remaining team members. Who gives a shit?

The team that wants to show up each day (actually, symbolically, metaphorically) because the problem they’re solving is something they care about, and the people alongside them are folks who are committed to them. Not to the sacrifice of economics, but with a double bottom line.

And the investors who actually have courage. Who are willing to put something at risk for a startup. Who are about the outcome not the markup, not the content marketing. F those folks who run towards a success and away from a failure.

In my world Ambrook is a Heart in the Game startup. Bunch of super sharp people building financial tools for farmers – for the real world economy. Everyone there could likely earn more in a different job, join one of the frontier labs or Magnificent Seven. But they’re not. Because they want that double bottom line outcome – satisfaction and dollars. Read their blog – you’ll see how they’re ‘legible to talent’ not just capital. Oh and trust me, the capital is there (more news tk) but today they care more about touching grass and whether their customers can keep growing their own businesses. And it makes me so happy to support them because Heart is in the Game there.

Is your Heart in the Game? Is your CEOs Heart in the Game? Your VCs? If not….

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