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.
37 formulas across 1 categories
Performance Metrics
Annual Recurring Revenue
ARR (annual recurring revenue) is MRR x 12: the annualized value of a company's active subscription or contract revenue, excluding one-time fees. 200 customers paying $500 a month is $1.2M ARR.
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 / ...
Monthly Burn Rate
Burn rate is how much cash a company consumes per month: gross burn is total outflows, net burn subtracts customer collections.
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
DPI is distributions to paid-in capital: cash actually returned to investors divided by capital actually called. It counts realized money only.
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 / ...
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...
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
IRR is the annualized rate that makes the present value of an investment's cash flows equal zero. It is the timing-sensitive companion to a multiple.
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...
Multiple on Invested Capital
MOIC is multiple on invested capital: total value, realized plus unrealized, divided by the capital invested. It ignores time entirely.
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 sales efficiency ratio: the quarter-over-quarter change in recurring revenue, annualized, divided by the prior quarter's sales and marketing spend.
Magic Number = Net New ARR (Q) / S&M ...
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
Net dollar retention is this year's revenue from last year's customers divided by last year's revenue from those same customers, expressed as a percentage.
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...
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 capital: the share of a fund's reported performance that still sits in unsold assets rather than in cash already distributed.
RVPI = Residual Value / Paid-In Capital
Rule of 40 Score
The Rule of 40 says a healthy software company's growth rate plus its profit margin should add up to at least 40 percent.
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...