Reference
VC Formulas & Calculations
Every formula a founder or fund manager needs — from IRR and MOIC to burn rate, CAC/LTV ratios, and waterfall distributions. Click any formula for the full breakdown.
43 formulas across 1 categories
Performance Metrics
Annual Recurring Revenue
Annual Recurring Revenue — the annualized value of a company's subscription or contract revenue. The primary revenue metric for SaaS and subscription businesses, used to benchmark growth, valuation, and fundraising.
ARR = MRR x 12
ARR Multiple
A valuation metric expressing a company's enterprise value as a multiple of its Annual Recurring Revenue — the primary valuation benchmark for high-growth SaaS businesses.
ARR Multiple = Enterprise Value / ARR
Annual Contract Value
The average annual revenue generated per customer contract, commonly used in SaaS businesses.
ACV = Total Contract Value / Contract...
VC Batting Average
The percentage of a VC's investments that generate positive returns, as opposed to partial or total losses.
Batting Average = Profitable Exits / ...
Breakeven Point (units)
The moment when a company's revenue equals its costs, requiring no additional external funding to sustain operations.
Breakeven = Fixed Costs / (Price per ...
Monthly Burn Rate
The rate at which a company spends its cash reserves, typically expressed as a monthly figure. Gross burn is total monthly cash outflow; net burn subtracts revenue collected.
Burn Rate = (Starting Cash - Ending C...
Customer Acquisition Cost
Customer Acquisition Cost — the total cost to acquire one new customer, including sales and marketing expenses. A core unit economics metric that determines whether a business model is economically viable at scale.
CAC = Total Sales & Marketing Spend /...
CAC Payback Period (months)
The number of months required to recover the cost of acquiring a customer from the gross profit that customer generates — a core measure of go-to-market efficiency.
CAC Payback = CAC / (ARPA x Gross Mar...
Capital Efficiency Ratio
The ratio of revenue generated to total capital raised, measuring how effectively a startup converts investment into growth.
Capital Efficiency = ARR / Total Capi...
Customer Churn Rate
The percentage of customers or revenue lost over a given period, a critical indicator of product-market fit.
Churn Rate = Customers Lost in Period...
Customer Acquisition Cost
The total cost of acquiring a new customer, including all sales and marketing expenses.
CAC = Total Sales & Marketing Spend /...
LTV to CAC Ratio
The ratio between lifetime value (LTV) and customer acquisition cost (CAC), commonly used to evaluate SaaS business health.
LTV:CAC = LTV / CAC
Distributions to Paid-In Capital
Distributions to Paid-In Capital — the ratio of cash actually returned to LPs divided by the capital they invested. The only VC performance metric based on realized, distributed cash.
DPI = Cumulative Distributions / Paid...
Distributions to Paid-In Capital
Distributions to Paid-In — the ratio of cash actually returned to LPs versus capital contributed, measuring realized (not paper) returns.
DPI = Cumulative Distributions / Paid...
Portfolio Default Rate
The percentage of LPs who fail to meet capital calls, or the percentage of venture debt borrowers who default on their obligations.
Default Rate = Failed Investments / T...
Earnings Before Interest, Taxes, Depreciation & Amortization
Earnings Before Interest, Taxes, Depreciation, and Amortization — a proxy for operating cash flow and profitability, especially relevant for growth equity and PE deals.
EBITDA = Revenue - COGS - Operating E...
EBITDA Multiple
A valuation metric expressing a company's value as a multiple of its EBITDA — commonly used in growth equity and private equity but less in early-stage VC.
EBITDA Multiple = Enterprise Value / ...
Earnings Before Interest and Taxes
A profitability metric that shows operating earnings before accounting for financing costs and taxes.
EBIT = Revenue - COGS - Operating Exp...
EV/Revenue Multiple
A valuation multiple that compares a company's total enterprise value to its annual revenue, commonly used to benchmark SaaS and tech companies.
EV/Revenue = Enterprise Value / Annua...
Expansion MRR
Additional recurring revenue generated from existing customers through upgrades or expanded usage.
Expansion MRR = Σ (Upgrade MRR + Cros...
Free Cash Flow
Cash generated by a business after accounting for capital expenditures — a measure of true financial health and the basis for many valuation models.
FCF = Operating Cash Flow - Capital E...
Portfolio Graduation Rate
The percentage of a fund's portfolio companies that successfully raise the next round of financing, indicating deal quality and portfolio momentum.
Graduation Rate = Companies Raising N...
Gross Revenue Retention
The percentage of recurring revenue retained from existing customers over a period, excluding any expansion revenue from upsells — measures pure churn.
GRR = (Starting MRR - Churned MRR - C...
Internal Rate of Return
Internal Rate of Return — the annualized rate of return on a portfolio or investment, accounting for the timing of cash flows. The primary time-weighted performance metric used by VC funds.
0 = Σ CFt / (1 + IRR)^t
Implied Post-Money Valuation
A company's inferred value based on the price paid for a portion of its equity, which may differ from its actual enterprise or intrinsic value.
Implied Valuation = Investment Amount...
Internal Rate of Return
The annualized return rate that makes the net present value of all cash flows equal to zero — the standard VC performance metric.
0 = Σ CFt / (1 + IRR)^t
Customer Lifetime Value
Lifetime Value — the total revenue a business expects to earn from a single customer over the entire duration of their relationship.
LTV = ARPA x Gross Margin % x (1 / Ch...
Customer Lifetime Value
The total revenue a business expects to earn from a customer over the entire duration of the relationship.
LTV = ARPA x Gross Margin % x (1 / Ch...
Multiple on Invested Capital
Multiple on Invested Capital — the total return on an investment expressed as a multiple of the original capital deployed. A 3x MOIC means you received $3 for every $1 invested.
MOIC = Total Value / Total Invested C...
Multiple on Invested Capital
Multiple on Invested Capital — the total value returned divided by the total capital invested, expressed as a multiple (e.g., 3x means tripling your money).
MOIC = Total Value / Total Invested C...
Monthly Recurring Revenue
Monthly Recurring Revenue — the total predictable subscription revenue a company earns each month. The month-by-month building block of ARR and the most closely tracked revenue metric for early-stage SaaS.
MRR = Σ Monthly Recurring Revenue fro...
SaaS Magic Number
A SaaS efficiency metric measuring how much ARR growth is generated per dollar of sales and marketing spend — above 0.75 is generally considered efficient.
Magic Number = Net New ARR (Q) / S&M ...
Market Capitalization
The total market value of a company's outstanding shares, calculated as share price multiplied by total shares.
Market Cap = Share Price x Total Shar...
Net Burn Rate (monthly)
The actual monthly cash loss after subtracting revenue from total operating expenses — the real rate at which a company is depleting its cash reserves.
Net Burn = Total Expenses - Total Rev...
Net Dollar Retention Rate
The percentage of recurring revenue retained from existing customers over a period, including expansion, contraction, and churn. Above 100% means existing customers are growing.
NDR = (Starting MRR + Expansion - Con...
Net Revenue Retention
The percentage of recurring revenue retained from existing customers over a period, including expansion and contraction.
NRR = (Starting MRR + Expansion - Con...
Net Revenue Retention
The percentage of revenue retained from existing customers year-over-year, including upsells and expansions. NRR above 100% means existing customers are growing.
NRR = (Starting MRR + Expansion - Con...
Degree of Operating Leverage
The degree to which a company can increase revenue without proportionally increasing costs, driving margin expansion at scale.
Operating Leverage = % Change in Oper...
Operating Margin
Revenue minus operating expenses expressed as a percentage of revenue.
Operating Margin = Operating Income /...
Payback Period
The time required for a company to recover its Customer Acquisition Cost (CAC) from the gross margin generated by that customer.
Payback Period = Initial Investment /...
Residual Value to Paid-In Capital
Residual Value to Paid-In — the unrealized (paper) value of a fund's remaining portfolio relative to capital contributed. RVPI = TVPI minus DPI.
RVPI = Residual Value / Paid-In Capital
Rule of 40 Score
A SaaS benchmark where a company's revenue growth rate plus profit margin should exceed 40%. Companies above 40% are considered well-balanced between growth and profitability.
Rule of 40 = Revenue Growth Rate (%) ...
Total Value to Paid-In Capital
Total Value to Paid-In — the sum of distributions plus remaining portfolio value, divided by capital contributed. Includes both realized and unrealized returns.
TVPI = (Distributions + Residual Valu...