Metrics & Performance
EBITDA Multiple
Last updated
Quick Answer
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
EBITDA Multiple = Enterprise Value / EBITDA
Where
- EV
- = Enterprise Value
- EBITDA
- = Earnings Before Interest, Taxes, Depreciation & Amortization
An EBITDA multiple is the ratio of a company's enterprise value to its EBITDA: Enterprise Value / EBITDA. It's the primary valuation methodology for profitable businesses in private equity and growth equity. Example: a company with $20M EBITDA valued at $200M is trading at 10x EBITDA. EBITDA multiples vary significantly by industry, growth rate, and market conditions. High-growth software companies may trade at 20-30x EBITDA; slower-growth industrial businesses at 5-8x. For early-stage VC, EBITDA multiples are irrelevant (companies are pre-profit) — ARR multiples and DCF are more applicable. EBITDA multiples become relevant as companies approach profitability and contemplate later-stage growth equity or PE transactions.
Related Concepts
Further Reading
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Startup Valuation Methods: 7 Approaches VCs Actually Use
Startup valuation is more art than science — especially at early stages. Here are the 7 methods VCs actually use to price rounds, with formulas, worked examples, and the common founder mistakes that leave money on the table.
How to Prepare a Financial Model That VCs Take Seriously
A strong startup financial model can make or break your fundraise. Learn exactly what VCs expect — from unit economics to scenario planning — and how to build one that earns credibility.
Valuation Policy for Venture Funds: ASC 820 Compliance Guide
A practical guide to building an ASC 820-compliant valuation policy for venture funds — covering governance, methodologies by stage, LP reporting, and common mistakes emerging managers make.
Tools & Resources
Frequently Asked Questions
What is EBITDA Multiple in venture capital?
An EBITDA multiple is the ratio of a company's enterprise value to its EBITDA: Enterprise Value / EBITDA. It's the primary valuation methodology for profitable businesses in private equity and growth equity. Example: a company with $20M EBITDA valued at $200M is trading at 10x EBITDA.
Why is EBITDA Multiple important for startups?
Understanding EBITDA Multiple is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does EBITDA Multiple fall under in VC?
EBITDA Multiple falls under the metrics category in venture capital. This area covers concepts related to the quantitative measures used to evaluate fund and company performance.
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