Definition
Equity value is the value attributable to shareholders after subtracting debt and other senior claims and adding cash (relative to enterprise value). Public-market equity value is often approximated by market capitalization.
Formula
Equity value = EV + cash - debt - preferred - minority + adjustments
Common mistakes
- Comparing equity value (market cap) to EV multiples (mismatch).
- Using inconsistent dates for EV and balance sheet inputs.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Equity Value" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Equity Value Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Enterprise value vs equity value: how to bridge EV to equity) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Equity Value Calculator: Convert enterprise value (EV) into equity value using cash, debt, and other adjustments (optionally per share).
- Liquidation Preference Calculator (1x): Estimate investor proceeds at exit under a simple 1x non-participating liquidation preference vs converting to common (simplified).
- Multiple Valuation Calculator: Estimate enterprise value and equity value from a metric (ARR or revenue) and a valuation multiple (with net debt adjustments).
Guides
- Enterprise value vs equity value: how to bridge EV to equity: A practical guide to converting enterprise value (EV) into equity value using net debt and other claims (and avoiding common valuation mix-ups).
- Liquidation preference (1* non-participating): what it means at exit: Understand 1* non-participating liquidation preference, when investors convert to common, and how this changes proceeds at different exit values.
- Multiple valuation: how to use ARR/revenue multiples and avoid mix-ups: A practical guide to multiple-based valuation: choosing a metric, applying EV multiples, and bridging to equity value via net debt.
- Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs: A practical hub for startup fundraising and valuation basics: pre/post-money, pro rata, option pool shuffle, SAFE/note conversion, and liquidation preference outcomes.
- Valuation modeling hub: WACC, DCF, multiples, and equity value: A practical hub for valuation modeling: estimate a discount rate (WACC), run a simple DCF with sensitivity analysis, and translate enterprise value to equity value.