Pinion Blog
How I Mark My Investments Up and Down
My rules for changing what an angel investment is worth: a priced round from an outsider before anything goes up, ordinary bad news before it goes down, and the counts from our own 35 checks to show how rarely the first one happens.
I have written about reading investor updates and about what dilution does to a position. This post is about the valuation that we track in Pinion and how we mark it up and down.
The short version is that we are stingy about marking anything up and quick to mark things down. Bottom line: we need external validation from something like a priced round to mark our investment up. When the founders start talking about pivots and hail mary’s, we mark our investment down.
Where the portfolio actually sits
I went back through every check before writing this, because it is easy to describe a discipline you do not actually follow. Over eleven years we have written 35 checks into 29 companies, some directly, most through an angel group, and a handful through two small funds.
Of those 35 checks, 21 are carried at exactly what we paid. I have marked up four, in three companies, and every one of those four had a priced round led by someone else behind it. Five more carry a small markup only because a fund manager reported one. I have marked down one position that is still operating, written one off to zero, and exited two.
So roughly two thirds of the portfolio is at cost, and I have marked up fewer positions than I have taken losses on. Most early-stage companies have not done anything yet that would justify a different number, and "nothing has happened" rounds to cost.
What it takes for me to mark something up
A priced equity round has closed and a new outside investor set the price. Not a SAFE or a convertible note with a cap, because a cap is a ceiling the next investor negotiated, not a price anyone paid. Not an insider round where the people who already own the company agreed with themselves on a bigger number. Money from a stranger who did the work is the only signal we use.
Then I apply that price to what I actually own after the round, not to the stake I bought. Every round I have marked up came with dilution, from the new money and usually from an option pool refresh too. The headline multiple on those three companies ranges from about 3x to 11x. My position in each is marked lower than that, because my percentage went down while the valuation went up. I wrote about this arithmetic in the dilution post, and it is the single most common mistake I see in other people's spreadsheets.
I do not mark up the check I just wrote. Two of our 21 at-cost positions are follow-on checks into companies I had already marked up on an earlier round. The new check sits at cost because I paid that price. Carrying it at the number I just agreed to is not a markup, it is a restatement.
When someone else is the valuer, I use their number. Our fund positions are carried at whatever the manager last reported, up or down. Five of those sit a few points above cost and one sits a hair below.
And there is a list of things that are not marks, no matter how good they feel: a founder telling me what the company is "worth now", a secondary offer nobody accepted, a 409A valuation, a competitor's round, or revenue growth without a transaction. Those go in my notes and may make me more excited. They do not touch the number.
What it takes for me to mark something down
Much less. I do not wait for a down round to tell me a company is worth less, because by the time a down round closes the information is old. If I would not write the same check today at the same price, the mark should already be lower.
The signals I act on are the ordinary ones that show up in investor updates, which is why I read them closely: runway shrinking with no raise in sight, a bridge from existing investors at a flat or lower price, the plan missed for the second or third quarter in a row, the core team thinning out, a pivot that abandons the thing I invested in, or updates that simply stop arriving. Any one of those earns a haircut. Two or three together earn a big one.
Our one active markdown is carried at roughly a quarter of what we paid. This price was based on the company taking a substantial down round.
When a company shuts down, or stops communicating and has no visible path, it goes to zero.
Why bother?
Glad you asked! Two reasons:
The first is allocation. Angel checks are a slice of a larger picture, and the slice is only as honest as its marks. If I carry everything at the last round, venture looks like a bigger share of our net worth than it is and I write fewer checks than I should. If I carry it honestly, the number I compare against public equities and real estate is one I would actually accept in a sale.
The second is learning. The point of tracking a portfolio of early-stage bets is to find out whether I am any good at this. Marks that drift upward on hope make every decision look right. Marks that follow the evidence tell me which kinds of companies I keep misjudging.
How I keep track
Full disclosure: I built Pinion because the spreadsheet I used to do this in could not remember why a number had changed. Every position in Pinion has a cost, a current valuation, an ownership percentage after dilution, and a history of every mark with its date. The value you see is the current valuation times the diluted stake, or the exit amount, or zero, and nothing in between.
If you track your own angel portfolio, I would be curious what your up and down rules are, and especially what you do when the only evidence is silence.