Free calculator · Venture & Startup Finance
The VC Method, Work Backward From Exit
Works backward from a projected exit to post-money and pre-money valuations and the ownership a venture investor needs today, including an adjustment for expected future dilution. Inputs are the exit value, target annual return, years to exit, the investment amount, and expected dilution.
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The VC Method, Work Backward From Exit
Post-money value
$50.0M
exit ÷ 10.0× target
Ownership today
14.3%
dilution-adjusted
Pre-money value
$45.0M
post − investment
Ownership at exit
10.0%
investment ÷ post
Target multiple
10.0×
59% for 5y
The VC method is not a DCF: it starts at the exit and discounts at the required return. Because later rounds dilute early investors, the ownership they need today is the exit target divided by the expected retention ratio.
Learn the concept
This calculator comes from the free Entrepreneurial Finance course, where the concept is taught with readings, worked examples, and practice questions.
Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.