How a VC thinks about your valuation
VCs don't guess what a company is worth — they work backwards from a required return. A VC who invests $1M and needs 20× back expects $20M at exit. That return requirement drives every valuation they offer. Whether the number comes up in the room or not, they've already computed it.
How a VC runs the numbers · worked example
1 · The bet
$1M at 10×
VC invests $1M and needs $10M back at exit
→
2 · Work backwards
$60M exit → 17%
$10M ÷ $60M exit = they must own ~17% when you sell
→
3 · Today's price
≈ $3.2M pre-money
Add ~30% future dilution → ~24% today → $1M ÷ 24% − $1M
Whether it comes up in the room or not, the investor has already run this math. Knowing the answer before the meeting is the point of this method.
The formula — three steps
Required Exit Ownership = (Raise × Return Multiple) ÷ Target Exit Value
Ownership at Investment = Required Exit Ownership ÷ (1 − Future Dilution %)
Pre-Money = (Raise ÷ Ownership at Investment) − Raise
Return multiples by investor type
| Investor type | Typical multiple |
| Angel / Early Seed | 10× |
| Typical Seed VC | 15× |
| Typical Series A | 20× |
| Top-tier VC | 25× |
| Highly competitive deal | 30× |
💡 This is the number your investor computed before they walked into the room. Whether they share it or not, this is the ceiling they are privately working from.