A company I invested in is showing a $0 valuation. But I know they’re still alive and operating. Why the $0 valuation?
Consistent with early stage valuation methodologies, our valuation policy calls for marking companies to $0 in a number of cases in which the company may still be alive and kicking (and even doing well from many perspectives).
The most common example of this is where the company undergoes a substantial pivot in their business strategy or focus: in that context, our policy typically requires the company's valuation to be marked to $0 until a subsequent third party financing occurs following the pivot.
In other cases, we may receive news of potential impairment (negative news regarding the company's progress or an inability to contact the company or confirm its ongoing activity). In these cases, our policy generally calls for marking to $0 until a subsequent third party financing or exit event.
The fact that we have marked a valuation to $0 does not mean that the investment has been deemed entirely worthless or written off for tax purposes. In many cases we will re-value the investment when the company raises its next round of financing.