Metrics & Performance
Enterprise Value
Last updated
Quick Answer
The total value of a company including equity and net debt — a more complete measure of company value than market cap alone.
Enterprise Value (EV) is the total value of a business, accounting for both equity value and net debt (debt minus cash). Formula: EV = Market Cap (or equity value) + Total Debt - Cash. EV is used as the numerator in valuation multiples like EV/Revenue and EV/EBITDA. Unlike market cap, EV reflects what an acquirer would actually need to pay to take full ownership (buying equity) and assume debt. In VC, when we talk about a startup's 'valuation' of $100M, we typically mean equity value (the post-money valuation) — not enterprise value. EV becomes more relevant in later-stage deals where companies have meaningful debt or in acquisition analyses.
Related Concepts
Further Reading
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Closing a fund is just the beginning. Here's what happens in the critical 90 days after a new VC fund closes — and how the firm makes its first investment.
Education Technology Venture Capital: How VCs Are Betting on the Future of Learning
EdTech VC is back — and it's smarter than the 2020 bubble. Here's where the money is going, who the power players are, and what it actually takes to build an education company worth funding.
CAC: What Customer Acquisition Cost Means in Venture Capital
CAC (Customer Acquisition Cost) is the metric VCs use to assess go-to-market efficiency. Here's what it means, how to calculate it correctly, what good benchmarks look like, and how it interacts with LTV to determine business viability.
Comparisons
Frequently Asked Questions
What is Enterprise Value in venture capital?
Enterprise Value (EV) is the total value of a business, accounting for both equity value and net debt (debt minus cash). Formula: EV = Market Cap (or equity value) + Total Debt - Cash. EV is used as the numerator in valuation multiples like EV/Revenue and EV/EBITDA.
Why is Enterprise Value important for startups?
Understanding Enterprise Value is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
What category does Enterprise Value fall under in VC?
Enterprise Value 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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