Metrics & Performance
Last updated
Quick Answer
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
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.
In Practice
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 It 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.
VC Beast Take
Revenue multiples compressed dramatically from 2021 peaks (when 50-100x was common for high-growth companies) to more sustainable ranges of 10-30x by 2023. Understanding multiple cycles is essential for both entry pricing and exit timing.
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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.
Understanding Enterprise Value to Revenue is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
Enterprise Value to Revenue 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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