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How to use the Venture Valuation Tool

An overview of the venture valuation tool in the free Cap Table and Exit Waterfall Tool.

The Venture Valuation Tool is a sheet in the Cap Table & Exit Waterfall Tool, and is built to help entrepreneurs and investors understand how fundraising rounds and valuation impact proceeds and returns to investors.

How to use

The model can be used to create a forecast of funding rounds for a company, an investor’s specific investments, and returns to shareholders (multiples, ROI, and IRR) looking at investments on an incremental basis, evaluating returns at each stage independently to help investors analyze the shape of returns over time and help decide on investment strategy.

How it works

The video above provides details on the inputs and how to enter in your assumptions, but essentially what the model does is go through multiple rounds of investment of a company, and ask for the basic setup of what you expect:

  • Name of each round
  • Investment round size
  • Premoney valuation of each round
  • Option pool created in each round
  • Time between rounds (in months)
  • % of companies that raise a next round, after this round
  • % of companies that sell, after this round
  • Average gross exit multiple for companies selling after this round (not raising the next round)

Venture Valuation tool

And this sets up the future investment rounds of the company and creates a forecast of proceeds, ROI, and gross multiples on an expected and probability-weighted basis.

Venture Valuation tool

If desired, you can use the tool to model all investors as well as a single investor, creating the same performance analysis for the single investor, and highlighting the optimal investment participation strategy (invest in next round or not).

Venture Valuation tool


Inputs for this sheet are directly on the sheet, and are input on a per-year basis.

Common Modifications

No common modifications, although I want to point out a couple things about what the model does not do.

The hardest part is setting up your expectations of gross multiples of sales after each round and % of companies that raise a next round. They can be highly variable depending on your investment strategy - industry, stage, geography, etc. - and the market’s standards at the moment. I’ve populated the tool with some defaults, but you will want to change the assumptions if you are going to use it in practice in valuing investments.

This is also not the VC Method; while this tool can be used similarly, the VC Method is explicitly constructed to calculate the valuation at the time of investment that will achieve a certain return, given expectations of exit and future rounds. You can accomplish similar objectives using this tool, but it’s takes a little more iteration to achieve similar results.