Valuation and returns
Revenue multiple valuation calculator
Most growth-stage startups are priced on a multiple of recurring revenue. Enter ARR and a multiple and see what it means for your round.
The multiple is your input. Multiples vary with growth, retention, margin and market conditions; use comparable deals, not a rule of thumb.
How it works
Investors in recurring-revenue businesses often anchor valuation to a multiple of annual recurring revenue (ARR). The multiple reflects growth, net revenue retention, gross margin and the market for similar companies.
Because the multiple carries so much weight, test a range. The calculator shows the valuation at your multiple and at 25% lower, a common gap between founder hopes and investor offers.
The formula
- Pre-moneyARR x revenue multiple.
- Post-moneyPre-money + amount raised.
- Stake soldAmount raised / post-money.
Worked example
A company with $2 million ARR at an 8x multiple is worth $16 million pre-money. Raising $4 million sells 20%. At a 6x multiple the pre-money would be $12 million.
Put the numbers in your data room
Investors will rebuild your ARR from billing data. Put an ARR bridge and a billing export (customer names redacted) in the data room so the multiple is applied to a number they trust.
Revenue multiple valuation calculator FAQ
What revenue multiple should I use?
Look at recent rounds and acquisitions of companies with similar growth and retention. Higher growth and retention support higher multiples.
ARR or revenue?
For subscription businesses, ARR. For others, trailing or forward revenue; state which one you use.
Is this how investors value pre-revenue startups?
No. Pre-revenue rounds are priced on team, market and comparables; see the VC method calculator.