Formula
How to Calculate Enterprise Value to Revenue
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 Multiple
EV/Revenue = Enterprise Value / Annual Revenue
Where
- EV
- = Enterprise Value
- Revenue
- = Trailing twelve months (TTM) revenue
What Is Enterprise Value to Revenue?
Enterprise value to revenue (EV/Revenue) is a valuation metric that divides a company's enterprise value (equity value plus debt minus cash) by its annual revenue. In venture capital, this multiple is widely used to value high-growth technology companies, particularly SaaS businesses where profitability is deferred in favor of growth. Higher growth rates, better retention, and stronger unit economics command higher multiples.
Worked Example
The Series C was priced at 25x EV/Revenue on $20M ARR, reflecting the company's 150% net revenue retention and 100% year-over-year growth — a premium multiple justified by metrics that suggested the revenue base would triple within 18 months.
Why Enterprise Value to Revenue Matters
EV/Revenue multiples are the lingua franca of tech company valuation. Understanding what drives multiples higher or lower helps VCs price investments accurately and set realistic expectations for portfolio company valuations.
Related Terms
Frequently Asked Questions
How do you calculate Enterprise Value to Revenue?
Enterprise Value to Revenue is calculated using the formula: EV/Revenue = Enterprise Value / Annual Revenue. A valuation multiple that compares a company's total enterprise value to its annual revenue, commonly used to benchmark SaaS and tech companies.
What is a good Enterprise Value to Revenue?
What constitutes a "good" Enterprise Value to Revenue depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.