Venture valuation is not discounted cash flow. It is a negotiated price per share for a security that carries preferences, set by working backward from a hoped-for exit, and then diluted by every round that follows. This section covers the arithmetic every VC and founder must be fluent in: the VC method; pre- and post-money valuation; price per share and fully diluted share counts; SAFE conversion; the option pool shuffle; dilution compounding across rounds; anti-dilution; and the exit waterfall that decides who actually gets paid. The worked files compute everything in Python and tie it out.
What the study covers
- 1Overview: why venture math is different
- 2Mechanics
- 3Key numbers
- 4Landmark deals and cases
- 5Pitfalls
- 6How an expert thinks about it
Technical exhibits
Worked examples, checklists and case studies included with this study.
Worked Cap Table Example
"Northwind Labs" from formation through two post-money SAFEs, a Series A with a pool shuffle, Series B and C; founder dilution path; all tables tied
Exit Waterfall Example
The same company sold at $30m–$2bn under 1x non-participating, 1.5x senior and 1x participating preferences; conversion breakpoints
VC Method and Mental Math
VC method with sensitivities and probability weighting; pool-shuffle formula; SAFE stacking; weighted-average vs full-ratchet anti-dilution; fund-returner math; shortcuts