Valuation worksheet

CurrencyFigures in

Stage and sector decide which methods are admissible. Nothing downstream changes until these do.

Stage

Repeatable sales motion, burning to grow.

Nature of business

Software and digital

Services

Industrial and resources

Consumer

Financial

Real assets and holdings

Deep tech and regulated

Selected

SaaS / subscription software

Net revenue retention and the Rule of 40 explain more of the multiple than growth alone.

Typical private-market ranges

EV / Revenue3–8x

EV / EBITDA12–20x

P / E25–40x

SDE3–5x

Directional only, and not sourced from live data. They reflect mid-cycle private transactions in developed markets. Replace them with your own comparable set before quoting anything.

Ranked for a scaling, high growth business in saas / subscription software.

Primary

Comparable company multiplesMarket

Enough public or private peers exist that the market's own pricing is informative.SaaS / subscription software: Price on forward ARR, not trailing revenue, and adjust the multiple for net revenue retention and gross margin before applying it.

Primary

Discounted cash flowIncome

Cash flows are forecastable with enough confidence that the discounting does real work.SaaS / subscription software: Customer acquisition cost is expensed today for cash flow arriving over years, so early-year free cash flow understates economics. Model cohort contribution, not accounting profit.

Primary

First Chicago (scenario weighted)Forward-looking

Explicitly separates the success case from the base and failure cases instead of averaging them into mush.

Primary

Precedent transactionsMarket

Actual deals for similar assets set a floor and ceiling on what a buyer has paid.

Primary

Venture capital methodForward-looking

Works backwards from a plausible exit to what an investor can pay today at target return.

Not suitable

Adjusted net asset valueAsset

Value here is intangible and operational; book assets understate it badly.

Not suitable

Berkus methodEarly-stage heuristic

Once revenue exists, milestone heuristics are strictly worse than the data you now have.

Not suitable

Capitalisation of earningsIncome

Earnings are not stable enough for a single-period capitalisation to mean anything.

Not suitable

Dividend discount modelIncome

No dividend, or a dividend unrelated to earnings capacity. The model has nothing to discount.

Not suitable

Liquidation valueAsset

Only meaningful as a floor; not the operating answer for a going concern.

Not suitable

Replacement costAsset

Cost to build says nothing about value once a market has priced the output.

Not suitable

Risk factor summationEarly-stage heuristic

Superseded by actual operating data.

Not suitable

Scorecard (Payne) methodEarly-stage heuristic

Superseded by actual operating data.

Not suitable

Seller's discretionary earnings multipleMarket

The company has institutional management; SDE add-backs would be fiction.

Build the unsuitable methods anyway — useful as a floor or a sanity check, never as a conclusion

One column per method. Only the columns feeding an admissible method are built. Figures in thousands of USD unless marked otherwise. Every field has a ? that explains it in plain language.

Explain every field

Financial base

Feeds every income and market method

Revenue (last twelve months)$EBITDA$Net income$Cash and equivalents$Total debt$Shares outstandingSame unit basis as the figures above

Discounted cash flow

Forecast

Forecast years1 to 10Year 1 revenue growth%Final year revenue growth%Fades linearly from year 1Starting EBITDA margin%Final year EBITDA margin%D&A as % of revenue%Capex as % of revenue%Working capital as % of revenue change%Tax rate%

Discount rate

CAPM build-up

Risk-free rate%Long government bond yieldBetaEquity risk premium%Size premium%Company-specific premium%Key-person, concentration, country riskPre-tax cost of debt%Equity weight in capital structure%

Terminal value

Usually 60–80% of the answer

Terminal methodTerminal growth rate%Keep below long-run nominal GDP

Mid-year discounting convention

Comparable multiples

Use EV / RevenueUse EV / EBITDAUse P / E

Peer EV / RevenuexPeer EV / EBITDAxPeer P / ExDiscount for lack of marketability%Typically 15–35% for private stakesControl premium adjustment%Only if valuing a controlling stakeRange spread around the point estimate%

Precedent transactions

Transaction EV / EBITDAxSynergy haircut%Portion of the deal multiple attributable to buyer-specific synergies

Venture capital method

Years to exitRevenue at exit$Exit revenue multiplexTarget IRR%Expected future dilution%This round's investment$

First Chicago scenarios

Years to exitRequired IRR%Upside exit value$Upside probability%Base exit value$Base probability%Downside exit value$Downside probability%

One worksheet per method, footed line by line, with the reasoning and the failure mode alongside.

Market approach · Primary

Comparable company multiples

$18,347

$14,677 – $22,016

EV / Revenuerevenue 12,000 × 2.2x → EV 26,400, less net debt

$24,200

Revenue multiples ignore whether revenue converts to cash. Only defensible when peers share a similar margin structure.

EV / EBITDAEBITDA 2,400 × 9.5x → EV 22,800, less net debt

$20,600

The workhorse multiple. Capital-structure neutral, but blind to capex intensity — two businesses at the same EBITDA can have very different real cash generation.

Price / Earningsnet income 1,500 × 16x

$24,000

P/E is already an equity value, so no net-debt adjustment. It is distorted by leverage and by tax position.

Average of selected multiples3 methods

$22,933

Marketability and control adjustmentless 20% lack of marketability

$-4,587

Public comparables are liquid and quoted at minority prices. A private stake cannot be sold in a day, which is why a discount for lack of marketability applies — typically 15–35%.

Indicated equity value

$18,347

AssumesThe comparables are genuinely comparable in growth, margin, risk, and capital intensity.

Breaks whenMultiples import the market's mood along with its logic. A peer set priced in a bubble prices your company in a bubble.

Income approach · Primary

Discounted cash flow

$22,391

$18,362 – $28,460

Cost of equity (CAPM build-up)4.2% risk free + 1.25 beta × 5.5% equity risk premium + 2.5% size + 1.5% company-specific

15.1%

Beta scales market risk. The size and company-specific premiums exist because a private, concentrated business is riskier than the index and CAPM alone does not capture that.

After-tax cost of debt8.0% × (1 − 22.0%)

6.2%

Interest is deductible, so the real cost to the firm is net of tax shield.

Weighted average cost of capital70% equity × 15.1% + 30% debt × 6.2%

12.4%

This is the blended return capital providers demand. It becomes the discount rate for unlevered cash flow.

Year 1 free cash flowrevenue 14,160 (18.0% growth) × 20.0% margin → EBITDA 2,832; less D&A 566, tax at 22.0%, add back D&A, less capex 708 and working capital 216

$1,410

Unlevered free cash flow: what the business generates before paying any lender or shareholder. D&A is subtracted to get the tax right, then added back because it is not a cash outflow.

Year 2 free cash flowrevenue 16,249 (14.8% growth) × 21.0% margin → EBITDA 3,412; less D&A 650, tax at 22.0%, add back D&A, less capex 812 and working capital 209

$1,783

Year 3 free cash flowrevenue 18,117 (11.5% growth) × 22.0% margin → EBITDA 3,986; less D&A 725, tax at 22.0%, add back D&A, less capex 906 and working capital 187

$2,176

Year 4 free cash flowrevenue 19,612 (8.2% growth) × 23.0% margin → EBITDA 4,511; less D&A 784, tax at 22.0%, add back D&A, less capex 981 and working capital 149

$2,561

Year 5 free cash flowrevenue 20,592 (5.0% growth) × 24.0% margin → EBITDA 4,942; less D&A 824, tax at 22.0%, add back D&A, less capex 1,030 and working capital 98

$2,908

Present value of forecast cash flowsdiscounted at 12.4%, mid-year convention

$7,866

Mid-year convention assumes cash arrives evenly through the year rather than all on 31 December. It raises value by roughly half a year of discounting.

Terminal value (Gordon growth)year 5 FCF 2,908 × (1 + 2.5%) ÷ (12.4% − 2.5%)

$30,038

Everything after the forecast horizon, collapsed into one number. Terminal growth above long-run nominal GDP implies the company eventually becomes the economy — keep it below roughly 3%.

Present value of terminal value× discount factor 0.5568

$16,725

Terminal value is 68% of enterprise value. Above 75% means the forecast period is doing almost no work and the answer rests on two assumptions.

Enterprise valuePV of forecast + PV of terminal

$24,591

Less net debtdebt 3,000 less cash 800

$-2,200

Enterprise value belongs to all capital providers. Lenders are paid first, so subtract debt and add surplus cash to reach the shareholders' claim.

Equity value

$22,391

Sensitivity of equity value — discount rate against terminal growth

WACC \ g	1.5%	2.0%	2.5%	3.0%	3.5%
10.9%	24,601	25,743	27,021	28,460	30,092
11.7%	22,510	23,460	24,513	25,688	27,007
12.4%	20,711	21,511	22,391	23,364	24,446
13.2%	19,149	19,828	20,571	21,388	22,288
13.9%	17,779	18,362	18,995	19,687	20,445

If the corners of this table differ by more than about 2x, the model is not producing a valuation. It is producing a range within which your assumptions live. Report the range, not the centre cell.

AssumesCash flows are predictable, the discount rate reflects real risk, and the business survives to terminal year.

Breaks whenTerminal value routinely carries 60–80% of the answer, so small changes in g or WACC swing the result violently.

Forward-looking approach · Primary

First Chicago (scenario weighted)

$8,865

$5,319 – $14,184

Upside scenarioexit 120,000 ÷ 4.48 discount factor, weighted 15%

$4,014

The outcome that justifies venture capital existing. Low probability, dominates the weighted answer.

Base scenarioexit 40,000 ÷ 4.48 discount factor, weighted 50%

$4,460

A solid but unspectacular outcome — usually a trade sale at a modest multiple.

Downside scenarioexit 5,000 ÷ 4.48 discount factor, weighted 35%

$390

Acquihire, asset sale, or zero. Being explicit here is the point of the method.

Probability check100% total

Probability-weighted value

$8,865

AssumesThree genuinely distinct outcome paths with probabilities that sum to 100%.

Breaks whenProbability estimates are unfalsifiable. The method is honest about structure, not about accuracy.

Market approach · Primary

Precedent transactions

$21,590

$18,352 – $24,828

Transaction EV / EBITDAEBITDA 2,400 × 11.5x

$27,600

Deal multiples already include the control premium a buyer paid for the right to run the business.

Less net debt

$-2,200

Equity value at deal multiple

$25,400

Synergy haircutless 15%

$-3,810

Strategic buyers pay for synergies specific to them. Unless your buyer has the same synergies, that portion of the multiple is not available to you.

Indicated equity value

$21,590

AssumesRecent deals for similar assets, disclosed at a level you can normalise.

Breaks whenTransaction multiples embed control premiums and buyer-specific synergies you may never realise.

Forward-looking approach · Primary

Venture capital method

$12,503

$7,502 – $18,754

Exit valueexit-year revenue 40,000 × 3x

$120,000

The exit multiple should reflect what a mature version of this company trades at, not what today's hottest comparable trades at.

Return multiple required(1 + 40%) ^ 5 years

5.38x

A 40% target IRR over five years demands a 5.4x return. Venture funds target this because most portfolio companies return nothing.

Post-money value today120,000 ÷ 5.38

$22,312

Adjusted for future dilution× (1 − 35%)

$14,503

Later rounds dilute today's investor. Ignoring this systematically overstates what can be paid now.

Less this round's investment2,000

$-2,000

Pre-money is post-money minus the new cash going in. The distinction decides the founder's ownership.

Indicated pre-money value

$12,503

AssumesA credible exit value, exit year, target return, and expected future dilution.

Breaks whenTarget IRR and exit multiple are chosen, not observed. The method mostly restates the investor's mandate.

Where the methods disagree, and what you are willing to conclude from that.

Comparable company multiples

$18,347

Discounted cash flow

$22,391

First Chicago (scenario weighted)

$8,865

Precedent transactions

$21,590

Venture capital method

$12,503

$0$14,230$28,460

Bar = method range · tick = point estimate · right-hand box = weight

Weighted conclusion

$16,739

Range $12,842 to $21,648

The spread between the low and high here is 53% of the midpoint. A spread above roughly 60% means the methods are not converging and a single number should not be quoted to a counterparty. Present the range and the reason for the disagreement instead.

What this tool cannot do

It has no market data. Every multiple, regional average, and comparable is a number you typed. Garbage in, precisely formatted garbage out.
It produces indications, not an appraisal. A defensible valuation for tax, litigation, or statutory purposes requires a credentialed valuer and a signed report.
It does not normalise your financials. Related-party transactions, below-market rents, and one-off items must be adjusted before the numbers are entered.
It ignores the terms of any actual deal. Liquidation preferences, ratchets, and earn-outs routinely matter more to a founder's outcome than the headline valuation.

Prior rounds, current ownership, and what the concluded value actually pays each class on an exit.

Seed

2023-06-01

Round labelInstrumentClosing dateAmount invested$Pre-money valuation$Post-money $7,500 · investor takes 20.0%Option pool created at this round%Created pre-money, so it dilutes existing holders only \u2014 the incoming investor does not share the cost.Liquidation preferencex1x means this investor gets their money back before common receives anything.ParticipationNon-participating: take the preference or convert, whichever is better. Participating: take the preference and then share the rest.Proposed, not yet closed

Series A

2025-03-01

Round labelInstrumentClosing dateAmount invested$Pre-money valuation$Post-money $22,000 · investor takes 18.2%Option pool created at this round%Created pre-money, so it dilutes existing holders only \u2014 the incoming investor does not share the cost.Liquidation preferencex1x means this investor gets their money back before common receives anything.ParticipationNon-participating: take the preference or convert, whichever is better. Participating: take the preference and then share the rest.Proposed, not yet closed

Add a round

Prior or proposed

Enter every round that issued equity, including bridges and converted notes. Grants and venture debt with no equity should be entered at zero invested.

Funding history

Round	Instrument	Date	Invested	Pre-money	Post-money	Investor stake	Step-up on prior post	Years held
Seed	Seed	2023-06-01	$1,500	$6,000	$7,500	20.0%	—	3.2
Series A	Series A	2025-03-01	$4,000	$18,000	$22,000	18.2%	2.40x	1.4
Total raised			$5,500		$22,000

The concluded equity value of $16,739 is 0.76x the last post-money of $22,000. That is a down round on the current analysis. Anti-dilution provisions in the prior round documents will trigger and will dilute common further than the headline suggests — check the actual instruments before using this number in a negotiation.

Dilution worked round by round

Opening positionbefore any external funding

100.0%

Ownership is tracked as percentages rather than share counts. The arithmetic is identical and it avoids the false precision of invented share numbers.

Seed — post-money valuationpre-money 6,000 + investment 1,500

$7,500

Post-money is what the whole company is worth immediately after the cash lands. Pre-money is what it was worth the moment before. The difference is exactly the cheque.

Seed — investor stake1,500 ÷ 7,500

20.00%

Ownership is always calculated on the post-money figure. Dividing by the pre-money overstates the investor's stake and is the most common arithmetic error in term-sheet discussions.

Seed — option pool created pre-money10.0% of the post-round company, carved out before the investment

10.00%

Creating the pool inside the pre-money means existing holders alone pay for it. The incoming investor gets their stated percentage on top of a company that has already been diluted. This is a price reduction disguised as a governance item.

Seed — dilution factor on existing holders(1 − 10.0%) × (1 − 20.0%)

0.7200x

Every existing holding is multiplied by this. Dilution is proportional: it does not change who owns more than whom, only how much each owns.

Founders and common after Seed

72.00%

Series A — post-money valuationpre-money 18,000 + investment 4,000

$22,000

Post-money is what the whole company is worth immediately after the cash lands. Pre-money is what it was worth the moment before. The difference is exactly the cheque.

Series A — investor stake4,000 ÷ 22,000

18.18%

Ownership is always calculated on the post-money figure. Dividing by the pre-money overstates the investor's stake and is the most common arithmetic error in term-sheet discussions.

Series A — option pool created pre-money5.0% of the post-round company, carved out before the investment

5.00%

Series A — dilution factor on existing holders(1 − 5.0%) × (1 − 18.2%)

0.7773x

Every existing holding is multiplied by this. Dilution is proportional: it does not change who owns more than whom, only how much each owns.

Founders and common after Series A

55.96%

Series A — step-up on the prior post-moneypre-money 18,000 ÷ prior post-money 7,500

2.40x

The step-up is the price change between rounds, not a measure of value created. Both figures are negotiated prices.

Total capital raised2 rounds

$5,500

Founders and common — closing stake

55.96%

Seed option pool — closing stake

6.22%

Seed — closing stake

15.55%

Series A option pool — closing stake

4.09%

Series A — closing stake

18.18%

Total ownershipmust equal 100%

100.00%

Ownership as at 2026-08-08

Founders and common56.0%$9,368

Seed option pool6.2%$1,041

Seed15.5%$2,602

Series A option pool4.1%$685

Series A18.2%$3,043

The final column is the pro-rata share of the concluded equity value, before any liquidation preference is applied. It is not what these holders receive. The waterfall below is.

Exit waterfall at the concluded value

Preferences are stacked, latest round paid first (otherwise pari passu)

Class	Terms	Invested	As-converted stake	Payout at $12,842	Payout at $16,739	Payout at $21,648	Return at concluded value
Founders and common		—	56.0%	$6,048	$8,713	$12,072	—
Seed option pool		—	6.2%	$672	$968	$1,341	—
Seed (converts to common)	1x non-participating	$1,500	15.5%	$1,680	$2,420	$3,353	1.61x
Series A option pool		—	4.1%	$442	$637	$882	—
Series A	1x non-participating	$4,000	18.2%	$4,000	$4,000	$4,000	1.00x

Preference stack$5,50033% of the concluded equity value

Common receives$10,319at the concluded value

Common and option holders receive nothing until the preference stack is satisfied. If the stack exceeds the concluded equity value, the headline valuation in this analysis is not a number any founder or employee will ever see. Preference terms, not valuation, decide the outcome in most exits below the last post-money.

Waterfall worked line by line at $16,739

Equity value available for distributionthe concluded value from the reconciliation

$16,739

The waterfall answers a different question from the valuation. Valuation asks what the company is worth; the waterfall asks who receives it.

Seed — liquidation preference1,500 invested × 1x

$1,500

The preference is the amount this class is contractually entitled to receive before common shareholders receive anything at all.

Series A — liquidation preference4,000 invested × 1x

$4,000

Total preference stack

$5,500

Seed — conversion testconverted outcome 2,420 versus preference 1,500

Converts

A non-participating holder chooses whichever is worth more: take the fixed preference, or convert to common and share pro rata. Because conversions change what is left for everyone else, this test is repeated until the choices stop changing.

Series A — conversion testconverted outcome 4,000 versus preference 4,000

Takes preference

Preference actually paidpari passu — shared in proportion to preference amounts if proceeds fall short

$4,000

Pari passu means all preferred rank equally. If proceeds are short, everyone is cut back proportionally rather than in order of arrival.

Residual available to common and converted holders16,739 − 4,000

$12,739

Founders and common — share of residual55.96% ÷ 81.82% participating × 12,739

$8,713

Seed option pool — share of residual6.22% ÷ 81.82% participating × 12,739

$968

Seed — share of residual15.55% ÷ 81.82% participating × 12,739

$2,420

Series A option pool — share of residual4.09% ÷ 81.82% participating × 12,739

$637

Founders and common — total received

$8,713

Seed option pool — total received

$968

Seed — total received1.61x money returned

$2,420

Series A option pool — total received

$637

Series A — total received1.00x money returned

$4,000

Total distributedmust equal the equity value above

$16,739

Simplifications you must check against the actual documents before relying on this: anti-dilution ratchets are not modelled, convertible notes and SAFEs are treated as priced equity at the terms you entered, accruing dividends and interest are ignored, pay-to-play and pull-up provisions are ignored, and management carve-outs are not applied. Each of these can move the common outcome materially.

Two deliverables: a live Excel model an analyst can interrogate, and a print-ready document you can circulate.

Report particulars

Prepared forCounterparty or recipientPrepared byRole or firmValuation dateStandard of valueFair market value assumes a hypothetical willing buyer. Investment value reflects one named buyer's synergies and is usually higher.Premise of valueReport statusAnything circulated before the underlying figures are verified should stay marked as draft.

Narrative statements

Purpose of the analysisSources of informationName the actual documents and data sources. A recipient's first question will be where the multiples came from.Scope limitations

Deliverables

Excel model

A workbook of 10 sheets: cover, method selection, full assumption register with definitions, a discounted cash flow built on live formulas that recalculates when an assumption is changed, one derivation sheet per method, the reconciliation, and the limiting conditions.

Cell formatting is structural only — column widths, number formats, and formulas. The file carries no fonts, fills, or borders, because those cannot be written from the browser. Apply house styling before it leaves your hands.

PDF document

A typeset report: cover page with the conclusion, basis of preparation, methodology selection with reasons, the assumption register, every derivation with its reasoning column, sensitivity, reconciliation, limiting conditions, and a signature block.

Choose Save as PDF in the print dialogue. Set margins to default and enable background graphics so the rules and charts render.

Before this leaves your desk

Every multiple in this analysis is a number you typed. Name the source in the sources field, or expect the first analyst who opens it to find that out and discount everything else accordingly.
An indicative analysis circulated during a fundraise can be treated as part of the offering material in many jurisdictions. Take advice on that before sending it to investors.
Keep the draft marking until the underlying financials have been verified. Removing it is a representation about work you may not have done.
Send the PDF for reading and the Excel for scrutiny. Sending only the PDF to a professional investor reads as an attempt to hide the workings.

Draft — for discussion

Indicative valuation analysis

Untitled company

Weighted indicated equity value$16,739Indicated range $12,842 to $21,648

Valuation date	2026-08-08
Prepared for	—
Prepared by	—
Standard of value	Fair market value
Premise of value	Going concern
Purpose	Indicative valuation to inform a negotiated equity transaction
Reporting currency	USD, figures stated in thousands
Stage of development	Scaling, high growth
Nature of business	SaaS / subscription software

This document is an indicative analysis prepared from information supplied by the preparer. It is not an appraisal, valuation opinion, or fairness opinion, and has not been prepared under any recognised valuation standard by a credentialed valuer. It must not be relied upon as the sole basis for any investment, financing, tax, or litigation decision, and does not constitute an offer or solicitation in respect of any security. Read with the basis of preparation and limiting conditions at the end of this document.

1Basis of preparation

Purpose	Indicative valuation to inform a negotiated equity transaction
Standard of value	Fair market value
Premise of value	Going concern
Valuation date	2026-08-08
Sources of information	Management-prepared financial statements for the periods stated, management forecasts, and publicly available market multiple data selected by the preparer.
Scope limitations	No independent audit, site visit, asset inspection, or verification of management information has been performed.

2Subject company and approach selection

The subject is a scaling, high growth business operating in saas / subscription software. Repeatable sales motion, burning to grow. Net revenue retention and the Rule of 40 explain more of the multiple than growth alone. Methods have been selected on that basis. Where a sector convention overrides the stage default, this is noted in the table below.

Method	Approach	Applicability	Reason for selection or exclusion
Comparable company multiples	Market	Primary	Enough public or private peers exist that the market's own pricing is informative. Price on forward ARR, not trailing revenue, and adjust the multiple for net revenue retention and gross margin before applying it.
Discounted cash flow	Income	Primary	Cash flows are forecastable with enough confidence that the discounting does real work. Customer acquisition cost is expensed today for cash flow arriving over years, so early-year free cash flow understates economics. Model cohort contribution, not accounting profit.
First Chicago (scenario weighted)	Forward-looking	Primary	Explicitly separates the success case from the base and failure cases instead of averaging them into mush.
Precedent transactions	Market	Primary	Actual deals for similar assets set a floor and ceiling on what a buyer has paid.
Venture capital method	Forward-looking	Primary	Works backwards from a plausible exit to what an investor can pay today at target return.
Adjusted net asset value	Asset	Reference only	Value here is intangible and operational; book assets understate it badly.
Berkus method	Early-stage heuristic	Reference only	Once revenue exists, milestone heuristics are strictly worse than the data you now have.
Capitalisation of earnings	Income	Reference only	Earnings are not stable enough for a single-period capitalisation to mean anything.
Dividend discount model	Income	Reference only	No dividend, or a dividend unrelated to earnings capacity. The model has nothing to discount.
Liquidation value	Asset	Reference only	Only meaningful as a floor; not the operating answer for a going concern.
Replacement cost	Asset	Reference only	Cost to build says nothing about value once a market has priced the output.
Risk factor summation	Early-stage heuristic	Reference only	Superseded by actual operating data.
Scorecard (Payne) method	Early-stage heuristic	Reference only	Superseded by actual operating data.
Seller's discretionary earnings multiple	Market	Reference only	The company has institutional management; SDE add-backs would be fiction.

3Assumption register

Every input used in this analysis, with its definition and the principal risk of misstatement. Figures marked as currency are stated in USD thousands.

Financial base

Input	Value	Definition and principal risk
Revenue (last twelve months)	$12,000	All the money the business billed customers over the past twelve months, before any costs are taken out. Also called sales or turnover. Risk: Money received is not the same as revenue. A twelve-month contract paid upfront is one year of revenue, not one month.
EBITDA	$2,400	Earnings before interest, tax, depreciation and amortisation. Roughly, the cash profit from operating the business, before paying lenders, the tax office, or writing down equipment. Risk: It is not free cash flow. A business that must constantly replace machinery converts far less EBITDA into spendable cash.
Net income	$1,500	The final profit after every cost, including interest and tax. What actually belongs to shareholders for the year. Risk: Easily distorted by one-off gains, asset sales, or unusual tax items. Strip those out first.
Cash and equivalents	$800	Money in the bank plus anything convertible to cash within days. Risk: Some of this may be needed to run the business day to day. Only genuinely surplus cash should be added to value.
Total debt	$3,000	Everything the business owes to lenders: bank loans, overdrafts, finance leases, shareholder loans. Risk: Include lease liabilities. Excluding them makes a leased-premises business look cheaper than an owned-premises one for no real reason.
Shares outstanding	1000	The number of ownership units the company has issued. Risk: Include options and convertible instruments that are likely to convert, or you will overstate value per share.

Discounted cash flow — forecast

Input	Value	Definition and principal risk
Forecast years	5	How many years you will project in detail before switching to a single terminal figure for everything after. Risk: Longer is not more accurate. Beyond five years most forecasts are extrapolation dressed as analysis.
Year 1 revenue growth	18.0%	How much bigger you expect sales to be next year, as a percentage. Risk: Founders' first-year numbers are optimistic by a wide margin. If last year grew 20%, next year is unlikely to grow 80%.
Final year revenue growth	5.0%	The growth rate in the last forecast year. The model fades from year one to this figure in a straight line. Risk: Ending at a high growth rate then applying a perpetuity assumption compounds optimism twice.
Starting EBITDA margin	20.0%	EBITDA as a percentage of revenue today. If you make 20 of profit on 100 of sales, the margin is 20%. Risk: Margins rarely jump. Assuming they double over five years needs a stated reason.
Final year EBITDA margin	24.0%	The profit margin you expect once the business reaches its forecast scale. Risk: Assuming a margin no competitor has ever reached is the single most common way a forecast becomes fiction.
D&A as % of revenue	4.0%	Depreciation and amortisation: the accounting charge that spreads the cost of equipment and intangible assets over their useful life. No cash leaves the business when it is recorded. Risk: It affects the tax bill, which is why the model subtracts it and then adds it straight back.
Capex as % of revenue	5.0%	Capital expenditure: cash spent buying or replacing long-lived assets such as machines, vehicles, or buildings. Risk: This is real cash leaving. A business where capex permanently exceeds depreciation is consuming more than it earns.
Working capital as % of revenue change	10.0%	As sales grow, more cash gets tied up in unpaid customer invoices and stock on the shelf. This says how much extra cash gets trapped for every extra unit of sales. Risk: Some businesses are negative here — customers pay upfront — which is a genuine cash advantage worth modelling.
Tax rate	22.0%	The percentage of profit paid in corporate income tax. Risk: Use the rate you expect to pay in future, not a rate temporarily reduced by loss carry-forwards.

Discounted cash flow — discount rate

Input	Value	Definition and principal risk
Risk-free rate	4.2%	The return you could earn with essentially no risk, used as the floor for every other return. Risk: Match the currency. Using a US Treasury yield to value a Nepali rupee business omits inflation and country risk.
Beta	1.25	How much this business's fortunes swing relative to the overall market. A beta of 1.0 moves with the market, 1.5 swings half again as hard, 0.7 is steadier. Risk: Private companies have no beta. You are borrowing one from listed peers, which is an assumption, not a measurement.
Equity risk premium	5.5%	The extra annual return investors demand for owning shares rather than government bonds. Risk: Add a country risk premium for markets with weaker legal protection or currency instability.
Size premium	2.5%	Extra return demanded because small companies are riskier and harder to sell than large ones. Risk: Skipping this is the most common way private valuations come out too high.
Company-specific premium	1.5%	Extra return for risks unique to this business: one customer producing half the revenue, one founder holding all the relationships, a single supplier, an unresolved lawsuit. Risk: This is the most subjective input in the whole model. State your reasons for it in writing.
Pre-tax cost of debt	8.0%	The interest rate the business pays, or would pay, to borrow. Risk: Use today's borrowing rate, not a legacy rate from a cheaper era.
Equity weight in capital structure	70.0%	What share of the business's funding comes from owners rather than lenders. 70 means 70% equity, 30% debt. Risk: Using the current mix locks in a temporary financing position as though it were permanent.

Discounted cash flow — terminal value

Input	Value	Definition and principal risk
Terminal method	gordon	How to value everything that happens after your forecast ends. Perpetuity assumes the business grows slowly forever; exit multiple assumes it is sold at a market price. Risk: This one choice routinely moves the answer by 20% or more. Run both.
Terminal growth rate	2.5%	How fast the business grows every year after the forecast period, forever. Risk: Above about 3% you are assuming the business eventually outgrows the entire economy, which cannot happen.
Exit EV/EBITDA multiple	8x	The price, expressed as a multiple of profit, that a buyer would pay for the business at the end of the forecast. Risk: Assuming a higher exit multiple than the entry multiple is assuming the market re-rates in your favour. Justify it or drop it.
Mid-year discounting convention	true	Assumes cash arrives steadily through the year rather than all on the last day, which is closer to reality. Risk: It raises value by roughly half a year of discounting. Fine to use, but be consistent.

Comparable company multiples

Input	Value	Definition and principal risk
Peer EV / Revenue	2.2x	How many times their annual sales similar companies are currently valued at. Risk: Enterprise value includes debt. Do not compare it to a share price.
Peer EV / EBITDA	9.5x	How many times their cash profit similar companies are valued at. Risk: A peer set chosen at a market peak will price your company at a market peak.
Peer P / E	16x	How many times their after-tax profit similar companies' shares trade at. Risk: Compare like with like on accounting standards and tax regimes.
Discount for lack of marketability	20.0%	A reduction applied because a stake in a private company cannot be sold quickly, unlike a listed share. Risk: Do not apply this on top of a multiple that was already derived from private transactions — that double counts.
Control premium adjustment	0.0%	An increase applied when the buyer gets control of the business and can change how it is run. Risk: Only add this if the stake genuinely confers control. A 30% holding usually does not.
Range spread around the point estimate	20.0%	How wide a band to show around the calculated figure, reflecting how uncertain the multiple is. Risk: A narrow band on a thin peer set projects false confidence.

Precedent transactions

Input	Value	Definition and principal risk
Transaction EV / EBITDA	11.5x	The multiple actually paid in recent purchases of similar businesses. Risk: Deal multiples are higher than trading multiples because buyers pay for control and synergies.
Synergy haircut	15.0%	The portion of that deal price that came from savings only that particular buyer could achieve, which you should not count on. Risk: If you are selling to a financial buyer with no synergies, the haircut should be large.

Capitalisation of earnings

Input	Value	Definition and principal risk
Normalised annual earnings	$2,100	A single sustainable profit figure, after removing one-off items, owner distortions, and anything that will not repeat. Risk: Normalisation decides the answer here. An above-market rent paid to the owner's own property company must be corrected.
Required rate of return	18.0%	The annual return an investor needs to justify buying this business rather than something safer. Risk: For a small private business this is usually 15–30%, far above listed market returns.
Sustainable growth rate	3.0%	How fast profit can keep growing indefinitely. Risk: If this approaches the required return, the calculated value runs to infinity. That is the model failing, not the business succeeding.

Seller's discretionary earnings

Input	Value	Definition and principal risk
Net profit before tax	$900	Profit as reported, after all expenses but before income tax. Risk: For owner-run businesses the reported figure is often deliberately low for tax reasons. That is what the add-backs correct.
Owner's compensation	$600	Everything the working owner takes: salary, bonus, dividends taken instead of salary, pension contributions. Risk: Add back only one owner's pay. If two family members genuinely work full time, the buyer must replace both.
Discretionary / personal expenses	$120	Costs run through the business that a new owner would not incur: personal vehicle, family phone plans, personal travel. Risk: Buyers challenge these hard, and rightly. Anything you cannot evidence will be removed from the price.
Interest expense	$180	Interest paid on business borrowings. Risk: Added back because the buyer will arrange their own financing, not inherit yours.
Tax	$260	Corporate income tax charged for the year. Risk: Added back because tax depends on the buyer's own structure and circumstances.
Depreciation and amortisation	$240	Accounting charge spreading the cost of equipment and intangibles over time. No cash moves. Risk: Adding it back is standard, but a business with heavy real equipment replacement needs will not sustain the earnings implied.
SDE multiple	3x	How many years of owner earnings a buyer will pay. Risk: The multiple rises with recurring revenue, transferable systems, and low owner dependence. It falls sharply without them.

Berkus method

Input	Value	Definition and principal risk
Cap per category	$500	The maximum value you allow any single milestone to add. Five categories, so the method's ceiling is five times this. Risk: The cap is a convention, not a measurement. Two honest analysts using different caps land far apart.
Sound idea	$400	Value assigned for having a coherent concept that addresses a real problem. Risk: Nearly every founder scores themselves at the cap here. Almost none should.
Prototype	$450	Value for having something that actually works, which reduces the risk that the technology cannot be built. Risk: A demo is not a prototype. Score what survives contact with a real user.
Quality management team	$500	Value for having people capable of executing, which is usually the biggest single risk before revenue. Risk: A strong CV in a different industry retires less risk than it appears to.
Strategic relationships	$300	Value for partnerships, distribution agreements, or design customers that reduce the risk nobody wants the product. Risk: A letter of intent with no money attached retires very little risk.
Product rollout or first sales	$250	Value for having shipped and sold, which reduces production and adoption risk. Risk: Friends-and-family sales do not count as market validation.

Scorecard method

Input	Value	Definition and principal risk
Regional average pre-money	$3,000	The typical valuation, before new money goes in, for comparable-stage startups in your region. Risk: The whole answer scales directly with this number. Guessing it makes every factor weight decorative.
Strength of management team	1.25x	How the founding team compares to the typical funded team locally. 1.00 is average, 1.25 is 25% better, 0.75 is worse. Risk: This factor carries the largest weight, so inflation here inflates everything.
Size of the opportunity	1.1x	How large the addressable market is compared to a typical funded startup's market. Risk: Top-down market sizing that starts with a national statistic and applies a percentage is almost always wrong.
Product or technology	1x	How differentiated and defensible the product is relative to the average funded company. Risk: Being first is not defensibility. Being hard to copy is.
Competitive environment	0.9x	Whether the competitive landscape is friendlier or harsher than typical. Risk: No visible competition usually means no market, not a clear run.
Marketing, sales, partnerships	0.8x	How strong the route to customers is compared to a typical funded company. Risk: A plan to hire a sales team is not a sales channel.
Need for additional investment	1x	Whether this company needs less further funding than typical, which is favourable, or more, which is not. Risk: Scores above 1.00 here mean less capital needed, which is the opposite of how founders often read it.
Other factors	1x	Anything material not captured above: regulatory position, timing, unusual assets. Risk: Leave at 1.00 unless you can name the specific factor.

Risk factor summation

Input	Value	Definition and principal risk
Base pre-money value	$3,000	The starting valuation for a typical comparable company, before adjusting for the twelve risks. Risk: Get this wrong and all twelve adjustments are decoration on a wrong number.
Value per risk notch	$250	How much value each single step of risk adjustment moves the valuation. Risk: The increment is arbitrary and does not scale with company size. Treat the output as very approximate.
Management risk	1
Stage of business	0
Legislation / political risk	1
Manufacturing risk	0
Sales and marketing risk	-1
Funding / capital raising risk	0
Competition risk	1
Technology risk	0
Litigation risk	0
International risk	-1
Reputation risk	1
Exit value risk	0

Venture capital method

Input	Value	Definition and principal risk
Years to exit	5	How long until the business is sold or listed, turning the investment into cash. Risk: Longer horizons demand a higher exit value to hit the same return, which lowers today's value sharply.
Revenue at exit	$40,000	What annual sales will be in the year the business is sold. Risk: This single number, multiplied by an assumed multiple, drives the entire answer.
Exit revenue multiple	3x	The multiple of sales a buyer will pay at exit. Risk: A mature, slower-growing business earns a lower multiple than a fast-growing one. Do not carry today's growth multiple to exit.
Target IRR	40.0%	The annual percentage return the investor requires. Venture funds target high rates because most of their investments return nothing. Risk: This is the investor's mandate, not a measurement of your business. It reflects their portfolio maths.
Expected future dilution	35.0%	How much today's investor's ownership will shrink as later funding rounds issue new shares. Risk: Ignoring dilution systematically overstates what an investor can pay today.
This round's investment	$2,000	The amount of new money going into the business in this round. Risk: Pre-money value equals post-money value minus this. The distinction decides how much of the company you give away.

First Chicago scenarios

Input	Value	Definition and principal risk
Years to exit	5	How long until the business is sold or listed, turning the investment into cash. Risk: Longer horizons demand a higher exit value to hit the same return, which lowers today's value sharply.
Required IRR	35.0%	The annual return required across all scenarios, used to discount each exit value back to today. Risk: Using a venture-level rate here and also modelling a failure case penalises the same risk twice.
Upside exit value	$120,000	What the business sells for if things go extremely well. Risk: This case carries most of the weighted answer despite its low probability, so it deserves the most scrutiny.
Upside probability	15.0%	The chance the upside case happens, in percent. Risk: The three probabilities must sum to 100 or the result is not an expected value.
Base exit value	$40,000	What the business sells for in a solid but unspectacular outcome, usually a trade sale. Risk: This is the most likely outcome for most companies, so do not treat it as the pessimistic case.
Base probability	50.0%	The chance the base case happens, in percent. Risk: For most startups this is well under half.
Downside exit value	$5,000	What is recovered if the business fails: an acquihire, an asset sale, or nothing. Risk: Entering a comfortable downside number is the main way this method gets misused.
Downside probability	35.0%	The chance of the downside case, in percent. Risk: If your downside probability is under 30% at early stage, check it against actual base rates.

Balance sheet

Input	Value	Definition and principal risk
Book value of assets	$9,000	Everything the business owns, valued as the accounts record it: original cost less accumulated depreciation. Risk: Book value is a historical record, not a current market price. It is rarely what anything would sell for.
Fair value adjustment	$1,200	The difference between what assets are recorded at and what they would actually fetch today. Can be positive or negative. Risk: Land and buildings are usually understated. Receivables and inventory are usually overstated.
Off-balance-sheet intangibles	$800	Valuable things the accounts do not show: brand, internally built software, customer lists, trained workforce. Risk: Accounting rules expense these as they are created, so they never appear as assets despite being real.
Total liabilities	$4,200	Everything the business owes: loans, supplier invoices, taxes due, lease obligations, provisions. Risk: Include deferred tax that would fall due on the fair value uplift you just added above.

Liquidation

Input	Value	Definition and principal risk
Cash	$800	Money in the bank on the day of wind-up. Risk: Recovers at full value, unlike everything else here.
Accounts receivable	$2,100	Money customers owe you but have not yet paid. Risk: Collection rates fall sharply once customers know the business is closing.
Receivable recovery	75.0%	The percentage of those unpaid invoices you would actually collect in a wind-up. Risk: Age the receivables. Anything over 120 days old rarely converts.
Inventory	$1,900	Stock held for sale or use in production. Risk: Carried at cost in the accounts, which is rarely what it fetches in a forced sale.
Inventory recovery	45.0%	The percentage of stock value recovered when sold quickly. Risk: Perishable, seasonal, or bespoke stock can recover close to nothing.
Furniture, fixtures, equipment	$2,600	Desks, machinery, vehicles, fit-out. Risk: Leasehold fit-out that cannot be removed has almost no recovery value.
Equipment recovery	30.0%	The percentage of equipment value recovered at auction. Risk: Specialised equipment with few possible buyers recovers least.
Real estate	$0	Land and buildings owned outright. Risk: Only include property you own. Leased premises are a liability here, not an asset.
Real estate recovery	85.0%	The percentage of market value achieved in a fast sale. Risk: The one asset class that usually holds most of its value under pressure.
Intangibles and goodwill	$1,500	Brand, customer relationships, and goodwill recorded from past acquisitions. Risk: Goodwill exists only while the business operates.
Intangible recovery	5.0%	The percentage of intangible value recovered when the business stops trading. Risk: Registered patents and domain names may sell. Goodwill will not.
Wind-down costs	$600	What it costs to close: redundancy payments, legal and insolvency fees, lease termination, storage, auctioneer commission. Risk: Routinely underestimated. These costs can consume a fifth of everything recovered.

Replacement cost

Input	Value	Definition and principal risk
Rebuild the technology	$2,200	What it would cost a competent competitor to build the same product from nothing. Risk: Include the dead ends. A rebuild hits many of the same failed approaches you did.
Rebuild the brand	$700	Marketing spend needed to reach the same level of awareness and trust. Risk: Reputation built over years cannot be bought in months at any price.
Rehire the team	$900	Recruitment fees plus the cost of the months new hires spend getting up to speed. Risk: Ignores whether comparable people are even available in your market.
Recreate data and customers	$500	What it would cost to acquire the same customer base and accumulate the same proprietary data. Risk: Often the largest and most understated component, because some datasets simply cannot be bought.
Licences and approvals	$250	Cost of obtaining the same regulatory permissions, certifications, and licences. Risk: The real barrier is usually time, not money. A two-year approval cannot be bought faster.

Dividend discount model

Input	Value	Definition and principal risk
Next year dividend per share	$1	The cash dividend each share is expected to pay over the coming year. Risk: Use the forward expectation, not the trailing payment.
Required return on equity	11.0%	The annual return a shareholder needs to hold this share rather than something safer. Risk: For dividend-paying financial businesses this is usually 8–14%.
Dividend growth rate	4.0%	How fast the dividend grows each year, forever. Risk: Must stay below the required return. If it does not, the formula returns nonsense and the constant-growth assumption is simply wrong.

4Derivation of value — Comparable company multiples

Market approach, applied as a primary method. Indicated value $18,347, within a range of $14,677 to $22,016.

Line	Working	Amount	Reasoning
EV / Revenue	revenue 12,000 × 2.2x → EV 26,400, less net debt	$24,200	Revenue multiples ignore whether revenue converts to cash. Only defensible when peers share a similar margin structure.
EV / EBITDA	EBITDA 2,400 × 9.5x → EV 22,800, less net debt	$20,600	The workhorse multiple. Capital-structure neutral, but blind to capex intensity — two businesses at the same EBITDA can have very different real cash generation.
Price / Earnings	net income 1,500 × 16x	$24,000	P/E is already an equity value, so no net-debt adjustment. It is distorted by leverage and by tax position.
Average of selected multiples	3 methods	$22,933
Marketability and control adjustment	less 20% lack of marketability	$-4,587	Public comparables are liquid and quoted at minority prices. A private stake cannot be sold in a day, which is why a discount for lack of marketability applies — typically 15–35%.
Indicated equity value		$18,347

Method assumes	The comparables are genuinely comparable in growth, margin, risk, and capital intensity.
Method breaks when	Multiples import the market's mood along with its logic. A peer set priced in a bubble prices your company in a bubble.
Weight in reconciliation	3

Discounted cash flow

Income approach, applied as a primary method. Indicated value $22,391, within a range of $18,362 to $28,460.

Line	Working	Amount	Reasoning
Cost of equity (CAPM build-up)	4.2% risk free + 1.25 beta × 5.5% equity risk premium + 2.5% size + 1.5% company-specific	15.1%	Beta scales market risk. The size and company-specific premiums exist because a private, concentrated business is riskier than the index and CAPM alone does not capture that.
After-tax cost of debt	8.0% × (1 − 22.0%)	6.2%	Interest is deductible, so the real cost to the firm is net of tax shield.
Weighted average cost of capital	70% equity × 15.1% + 30% debt × 6.2%	12.4%	This is the blended return capital providers demand. It becomes the discount rate for unlevered cash flow.
Year 1 free cash flow	revenue 14,160 (18.0% growth) × 20.0% margin → EBITDA 2,832; less D&A 566, tax at 22.0%, add back D&A, less capex 708 and working capital 216	$1,410	Unlevered free cash flow: what the business generates before paying any lender or shareholder. D&A is subtracted to get the tax right, then added back because it is not a cash outflow.
Year 2 free cash flow	revenue 16,249 (14.8% growth) × 21.0% margin → EBITDA 3,412; less D&A 650, tax at 22.0%, add back D&A, less capex 812 and working capital 209	$1,783
Year 3 free cash flow	revenue 18,117 (11.5% growth) × 22.0% margin → EBITDA 3,986; less D&A 725, tax at 22.0%, add back D&A, less capex 906 and working capital 187	$2,176
Year 4 free cash flow	revenue 19,612 (8.2% growth) × 23.0% margin → EBITDA 4,511; less D&A 784, tax at 22.0%, add back D&A, less capex 981 and working capital 149	$2,561
Year 5 free cash flow	revenue 20,592 (5.0% growth) × 24.0% margin → EBITDA 4,942; less D&A 824, tax at 22.0%, add back D&A, less capex 1,030 and working capital 98	$2,908
Present value of forecast cash flows	discounted at 12.4%, mid-year convention	$7,866	Mid-year convention assumes cash arrives evenly through the year rather than all on 31 December. It raises value by roughly half a year of discounting.
Terminal value (Gordon growth)	year 5 FCF 2,908 × (1 + 2.5%) ÷ (12.4% − 2.5%)	$30,038	Everything after the forecast horizon, collapsed into one number. Terminal growth above long-run nominal GDP implies the company eventually becomes the economy — keep it below roughly 3%.
Present value of terminal value	× discount factor 0.5568	$16,725	Terminal value is 68% of enterprise value. Above 75% means the forecast period is doing almost no work and the answer rests on two assumptions.
Enterprise value	PV of forecast + PV of terminal	$24,591
Less net debt	debt 3,000 less cash 800	$-2,200	Enterprise value belongs to all capital providers. Lenders are paid first, so subtract debt and add surplus cash to reach the shareholders' claim.
Equity value		$22,391

Sensitivity of indicated equity value

WACC / terminal growth	1.5%	2.0%	2.5%	3.0%	3.5%
10.9%	24,601	25,743	27,021	28,460	30,092
11.7%	22,510	23,460	24,513	25,688	27,007
12.4%	20,711	21,511	22,391	23,364	24,446
13.2%	19,149	19,828	20,571	21,388	22,288
13.9%	17,779	18,362	18,995	19,687	20,445

Method assumes	Cash flows are predictable, the discount rate reflects real risk, and the business survives to terminal year.
Method breaks when	Terminal value routinely carries 60–80% of the answer, so small changes in g or WACC swing the result violently.
Weight in reconciliation	3

First Chicago (scenario weighted)

Forward-looking approach, applied as a primary method. Indicated value $8,865, within a range of $5,319 to $14,184.

Line	Working	Amount	Reasoning
Upside scenario	exit 120,000 ÷ 4.48 discount factor, weighted 15%	$4,014	The outcome that justifies venture capital existing. Low probability, dominates the weighted answer.
Base scenario	exit 40,000 ÷ 4.48 discount factor, weighted 50%	$4,460	A solid but unspectacular outcome — usually a trade sale at a modest multiple.
Downside scenario	exit 5,000 ÷ 4.48 discount factor, weighted 35%	$390	Acquihire, asset sale, or zero. Being explicit here is the point of the method.
Probability check	100% total	OK
Probability-weighted value		$8,865

Method assumes	Three genuinely distinct outcome paths with probabilities that sum to 100%.
Method breaks when	Probability estimates are unfalsifiable. The method is honest about structure, not about accuracy.
Weight in reconciliation	3

Precedent transactions

Market approach, applied as a primary method. Indicated value $21,590, within a range of $18,352 to $24,828.

Line	Working	Amount	Reasoning
Transaction EV / EBITDA	EBITDA 2,400 × 11.5x	$27,600	Deal multiples already include the control premium a buyer paid for the right to run the business.
Less net debt		$-2,200
Equity value at deal multiple		$25,400
Synergy haircut	less 15%	$-3,810	Strategic buyers pay for synergies specific to them. Unless your buyer has the same synergies, that portion of the multiple is not available to you.
Indicated equity value		$21,590

Method assumes	Recent deals for similar assets, disclosed at a level you can normalise.
Method breaks when	Transaction multiples embed control premiums and buyer-specific synergies you may never realise.
Weight in reconciliation	3

Venture capital method

Forward-looking approach, applied as a primary method. Indicated value $12,503, within a range of $7,502 to $18,754.

Line	Working	Amount	Reasoning
Exit value	exit-year revenue 40,000 × 3x	$120,000	The exit multiple should reflect what a mature version of this company trades at, not what today's hottest comparable trades at.
Return multiple required	(1 + 40%) ^ 5 years	5.38x	A 40% target IRR over five years demands a 5.4x return. Venture funds target this because most portfolio companies return nothing.
Post-money value today	120,000 ÷ 5.38	$22,312
Adjusted for future dilution	× (1 − 35%)	$14,503	Later rounds dilute today's investor. Ignoring this systematically overstates what can be paid now.
Less this round's investment	2,000	$-2,000	Pre-money is post-money minus the new cash going in. The distinction decides the founder's ownership.
Indicated pre-money value		$12,503

Method assumes	A credible exit value, exit year, target return, and expected future dilution.
Method breaks when	Target IRR and exit multiple are chosen, not observed. The method mostly restates the investor's mandate.
Weight in reconciliation	3

5Reconciliation and conclusion

Method	Applicability	Low	Indicated	High	Weight
Comparable company multiples	Primary	$14,677	$18,347	$22,016	3
Discounted cash flow	Primary	$18,362	$22,391	$28,460	3
First Chicago (scenario weighted)	Primary	$5,319	$8,865	$14,184	3
Precedent transactions	Primary	$18,352	$21,590	$24,828	3
Venture capital method	Primary	$7,502	$12,503	$18,754	3

Comparable company multiples

Discounted cash flow

First Chicago (scenario weighted)

Precedent transactions

Venture capital method

$0$28,460

Weighted indicated equity value$16,739Indicated range $12,842 to $21,648

Weights reflect the applicability of each method to the subject's stage and sector. Weighting is a matter of judgement and is not derived from a statistical procedure. Where the spread between the low and high indications exceeds approximately 60% of the midpoint, the methods have not converged and a single point value should not be represented to a counterparty; the range and the reason for the divergence should be presented instead.

6Capitalisation and distribution of proceeds

Prior rounds are historical prices agreed under the conditions of their day. They are recorded here for context and because they will be used as anchors in negotiation; they are not evidence of present value. All amounts in USD thousands.

Funding history

Round	Instrument	Date	Invested	Pre-money	Post-money	Stake	Step-up
Seed	Seed	2023-06-01	$1,500	$6,000	$7,500	20.0%	—
Series A	Series A	2025-03-01	$4,000	$18,000	$22,000	18.2%	2.40x
Total raised			$5,500		$22,000

Ownership at the valuation date

Holder	Class	Invested	Stake	Pro-rata share of concluded value
Founders and common	Common	—	56.0%	$9,368
Seed option pool	Option pool	—	6.2%	$1,041
Seed	Preferred	$1,500	15.5%	$2,602
Series A option pool	Option pool	—	4.1%	$685
Series A	Preferred	$4,000	18.2%	$3,043

Dilution arithmetic

Line	Working	Amount	Reasoning
Opening position	before any external funding	100.0%	Ownership is tracked as percentages rather than share counts. The arithmetic is identical and it avoids the false precision of invented share numbers.
Seed — post-money valuation	pre-money 6,000 + investment 1,500	$7,500	Post-money is what the whole company is worth immediately after the cash lands. Pre-money is what it was worth the moment before. The difference is exactly the cheque.
Seed — investor stake	1,500 ÷ 7,500	20.00%	Ownership is always calculated on the post-money figure. Dividing by the pre-money overstates the investor's stake and is the most common arithmetic error in term-sheet discussions.
Seed — option pool created pre-money	10.0% of the post-round company, carved out before the investment	10.00%	Creating the pool inside the pre-money means existing holders alone pay for it. The incoming investor gets their stated percentage on top of a company that has already been diluted. This is a price reduction disguised as a governance item.
Seed — dilution factor on existing holders	(1 − 10.0%) × (1 − 20.0%)	0.7200x	Every existing holding is multiplied by this. Dilution is proportional: it does not change who owns more than whom, only how much each owns.
Founders and common after Seed		72.00%
Series A — post-money valuation	pre-money 18,000 + investment 4,000	$22,000	Post-money is what the whole company is worth immediately after the cash lands. Pre-money is what it was worth the moment before. The difference is exactly the cheque.
Series A — investor stake	4,000 ÷ 22,000	18.18%	Ownership is always calculated on the post-money figure. Dividing by the pre-money overstates the investor's stake and is the most common arithmetic error in term-sheet discussions.
Series A — option pool created pre-money	5.0% of the post-round company, carved out before the investment	5.00%	Creating the pool inside the pre-money means existing holders alone pay for it. The incoming investor gets their stated percentage on top of a company that has already been diluted. This is a price reduction disguised as a governance item.
Series A — dilution factor on existing holders	(1 − 5.0%) × (1 − 18.2%)	0.7773x	Every existing holding is multiplied by this. Dilution is proportional: it does not change who owns more than whom, only how much each owns.
Founders and common after Series A		55.96%
Series A — step-up on the prior post-money	pre-money 18,000 ÷ prior post-money 7,500	2.40x	The step-up is the price change between rounds, not a measure of value created. Both figures are negotiated prices.
Total capital raised	2 rounds	$5,500
Founders and common — closing stake		55.96%
Seed option pool — closing stake		6.22%
Seed — closing stake		15.55%
Series A option pool — closing stake		4.09%
Series A — closing stake		18.18%
Total ownership	must equal 100%	100.00%

Distribution of the concluded equity value

Seniority basis: pari passu, all preferred rank equally. Common shareholders, founders, and option holders receive nothing until the preference stack of $5,500 is satisfied, which is 33% of the concluded equity value.

Class	Terms	Invested	Stake	Low	Concluded	High	Return
Founders and common		—	56.0%	$6,048	$8,713	$12,072	—
Seed option pool		—	6.2%	$672	$968	$1,341	—
Seed (converts)	1x non-participating	$1,500	15.5%	$1,680	$2,420	$3,353	1.61x
Series A option pool		—	4.1%	$442	$637	$882	—
Series A	1x non-participating	$4,000	18.2%	$4,000	$4,000	$4,000	1.00x

Waterfall arithmetic

Line	Working	Amount	Reasoning
Equity value available for distribution	the concluded value from the reconciliation	$16,739	The waterfall answers a different question from the valuation. Valuation asks what the company is worth; the waterfall asks who receives it.
Seed — liquidation preference	1,500 invested × 1x	$1,500	The preference is the amount this class is contractually entitled to receive before common shareholders receive anything at all.
Series A — liquidation preference	4,000 invested × 1x	$4,000
Total preference stack		$5,500
Seed — conversion test	converted outcome 2,420 versus preference 1,500	Converts	A non-participating holder chooses whichever is worth more: take the fixed preference, or convert to common and share pro rata. Because conversions change what is left for everyone else, this test is repeated until the choices stop changing.
Series A — conversion test	converted outcome 4,000 versus preference 4,000	Takes preference
Preference actually paid	pari passu — shared in proportion to preference amounts if proceeds fall short	$4,000	Pari passu means all preferred rank equally. If proceeds are short, everyone is cut back proportionally rather than in order of arrival.
Residual available to common and converted holders	16,739 − 4,000	$12,739
Founders and common — share of residual	55.96% ÷ 81.82% participating × 12,739	$8,713
Seed option pool — share of residual	6.22% ÷ 81.82% participating × 12,739	$968
Seed — share of residual	15.55% ÷ 81.82% participating × 12,739	$2,420
Series A option pool — share of residual	4.09% ÷ 81.82% participating × 12,739	$637
Founders and common — total received		$8,713
Seed option pool — total received		$968
Seed — total received	1.61x money returned	$2,420
Series A option pool — total received		$637
Series A — total received	1.00x money returned	$4,000
Total distributed	must equal the equity value above	$16,739

This schedule does not model anti-dilution ratchets, discounts or caps on convertible instruments, accruing dividends, pay-to-play or pull-up provisions, management carve-outs, or option strike prices. Each can move the outcome to common materially and must be checked against the executed documents.

7Limiting conditions

This analysis is indicative. It is not an appraisal, valuation opinion, or fairness opinion, and has not been prepared under any recognised valuation standard by a credentialed valuer.
Financial information has been accepted as presented. No audit, review, site visit, or independent verification of assets, liabilities, contracts, or forecasts has been performed.
Market multiples, comparable companies, precedent transactions, and regional averages are inputs selected by the preparer. No independent market data source is embedded in this document.
Forecasts represent expectations at the valuation date. Actual results will differ, and the difference is frequently material.
The conclusion is expressed as a range. Any single figure extracted from that range without its context misrepresents the analysis.
Transaction terms including liquidation preferences, participation rights, anti-dilution protection, earn-outs, escrow, and warranties are not reflected. These routinely affect proceeds to a shareholder more than the headline value does.
This document does not constitute investment, legal, tax, or accounting advice, nor an offer or solicitation in respect of any security.
The analysis speaks only as at the valuation date and has not been updated for subsequent events.

Prepared by	—	Signature
Role	—	Date	2026-08-08
Prepared for	—
Status	Draft — for discussion

Running conclusion$16,739$12,842 – $21,648