Venture Capital Method
Definition
A valuation methodology that derives the maximum acceptable pre-money valuation for an investment by working backward from an expected exit value, applying a required return multiple over the expected holding period, and adjusting for anticipated dilution from future rounds. The venture capital method produces the maximum post-money valuation an investor can pay and still achieve the required return, given the stated assumptions.
Common Misapplication
The most common misapplication is presenting the venture capital method result as an objective company value rather than as the maximum value implied by the investor's return requirements. The venture capital method produces a value specific to a given investor's return expectations; a different investor with different return expectations will produce a different implied valuation from the same company.
FFI Standard Reference
This term is defined and applied in Book 4, Section 4.5: The Venture Capital Method.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Venture Capital Method. https://ffistandard.org/glossary/venture-capital-method/. 2026.