Cheat sheet

Module 1: Company basics

Use these formulas when you read a founder agreement or a first cap table. The lessons are shares and ownership and vesting and cliffs.

Ownership = your shares ÷ all shares
  5,000,000 ÷ 12,500,000 = 40%

Fully diluted shares = issued shares
  + granted options + unissued pool
  8,000,000 + 500,000 + 500,000
  = 9,000,000

Vested shares, 4 years, 1-year cliff
  = 0 before month 12
  = shares × months ÷ 48 from month 12
  4,000,000 × 18 ÷ 48 = 1,500,000

83(b) deadline
  = transfer date + 30 days
  Nov 4, 2026 → Dec 4, 2026

The Delaware franchise tax has two methods, and the company pays the lower result. The notice from Delaware uses the authorized shares method. The lesson is setting up the company.

Authorized shares method
  = $250 + $85 for each 10,000
    shares (or part of 10,000)
    more than 10,000, up to $200,000
  10,000,000 shares → $85,165

Assumed par value capital method
  = $400 for each $1M of assumed
    par value capital (minimum $400)
  $50,000 of assets, 8,500,000 of
  10,000,000 shares issued → $400

Module 2: Traction metrics

Use these formulas when you read a startup headline or prepare a board update. The lessons are ARR, run rate, and other revenue words, burn and runway, growth rates, and unit economics.

Run rate = revenue of one period
           × periods in a year
  $2M a month × 12 = $24M
  $500K a week × 52 = $26M

ARR = monthly recurring revenue × 12
  $250K MRR × 12 = $3M ARR

Net burn = cash out − cash in
  $150K − $50K = $100K a month

Runway = cash ÷ net burn
  $1.2M ÷ $100K = 12 months

Yearly multiple
  = (1 + monthly rate)^12
  1.10^12 = 3.14x, not 2.2x

Monthly rate from a weekly rate
  = (1 + weekly rate)^(52 ÷ 12) − 1
  5% a week → 23.5% a month

CMGR
  = (last ÷ first)^(1 ÷ months) − 1
  $20K to $80K in 6 months → 26.0%

A company is default alive if its revenue becomes equal to its expenses before the cash ends. The test uses the growth and the expenses of today (Paul Graham, 2015). The runway formula assumes no growth. Thus a company that grows fast can have short runway and still be default alive.

Gross margin = (revenue − cost of
               revenue) ÷ revenue
  ($1M − $200K) ÷ $1M = 80%

LTV = monthly revenue per customer
      × gross margin ÷ monthly churn
  $500 × 80% ÷ 2% = $20,000

LTV to CAC = LTV ÷ CAC
  $20,000 ÷ $6,000 = 3.33

CAC payback = CAC ÷ (monthly
  revenue per customer
  × gross margin)
  $6,000 ÷ ($500 × 80%) = 15 months

Yearly retention
  = (1 − monthly churn)^12
  (1 − 2%)^12 = 78.5%

NRR = (start MRR − cancellations
       − downgrades + upgrades)
      ÷ start MRR
  ($100K − $5K − $3K + $20K) ÷ $100K
  = 112%

GRR = the same, without the upgrades
  ($100K − $5K − $3K) ÷ $100K = 92%

Burn multiple
  = net burn ÷ net new ARR
  $6M ÷ $4M = 1.5x

Rule of 40 = revenue growth %
             + profit margin %
  30% + 15% = 45

Module 3: Stages and investors

Use these formulas to understand what an investor must get from your company. The lessons are how venture funds work and the power law.

Fund fee each year
  = fee rate × fund size
  2% × $100M = $2M a year

Proceeds for a 3x net return to LPs,
with 20% carry
  = paid-in + LP profit ÷ 80%
  $100M + $200M ÷ 0.8 = $350M

DPI = distributions
  ÷ paid-in capital
  $15M ÷ $60M = 0.25x

TVPI = (distributions
  + value of holdings)
  ÷ paid-in capital
  ($15M + $105M) ÷ $60M = 2.00x

IRR of one investment
  = multiple^(1 ÷ years) − 1
  3x in 5 years  → 24.6% a year
  3x in 10 years → 11.6% a year

Exit that returns the fund
  = fund size ÷ ownership at exit
  $100M ÷ 10% = $1B

Ownership at exit
  = ownership at entry
  × (1 − dilution 1)
  × (1 − dilution 2)
  15% × 0.813 × 0.866 = 10.56%

First check = target ownership
              × post-money valuation
  10% × $23.9M = $2.39M

The last two examples use Carta medians for Q2 2026. The median dilution was 18.7% at the Series A and 13.4% at the Series B. The median seed post-money valuation was $23.9M.

Module 4: Valuation

Use these formulas for every priced round. The lessons are pre-money and post-money, price per share, dollars and percent, and how valuations are set.

Post-money = pre-money + new money
  $14M + $1M = $15M

Investors' part
  = new money ÷ post-money
  $1M ÷ $15M = 6.67%

Price per share = pre-money
  ÷ fully diluted shares before
  $12M ÷ 10,000,000 = $1.20

New shares
  = new money ÷ price per share
  $3M ÷ $1.20 = 2,500,000

Value of a stake
  = ownership × valuation
  100% × $2M   = $2M
  10%  × $200M = $20M

Cap from a target (the YC method)
  = money to raise ÷ part to sell
  $1M ÷ 15% = $6.67M post-money

Module 5: SAFEs

Use these formulas before you sign a SAFE and at the round where it converts. The lessons are post-money cap math, the cap and the discount, how a SAFE converts, and MFN and side letters.

SAFE part = amount ÷ post-money cap
  $500K ÷ $5M = 10%
  Five $100K SAFEs at $5M
  = 10%, not 2%

Company capitalization
  = shares before the SAFEs
  ÷ (1 − all SAFE parts)
  10,000,000 ÷ (1 − 11.25%)
  = 11,267,606

SAFE price
  = cap ÷ company capitalization
  $8M ÷ 11,267,606 = $0.71

Discount price = round price
                 × (1 − discount)
  $2.00 × (1 − 20%) = $1.60

Conversion price = the lower of the
  SAFE price and the discount price

The discount gives the lower price
  when the round price is less
  than SAFE price ÷ (1 − discount)
  $0.475 ÷ 0.80 = $0.59375

Pre-money SAFE price = cap ÷ shares
  before the SAFEs, with the
  new pool
  $8M ÷ 10,000,000 = $0.80
  (no pool in this example)

SAFE in a sale before it converts
  = the larger of the amount and
    SAFE part × sale price
  $1M at a $10M cap, $50M sale → $5M
  $1M at a $10M cap, $5M sale  → $1M

Extra round part for pro rata letters
  = A ÷ (1 − P) − A
  A = the part that the lead wants
  P = the SAFE parts with letters
  20% ÷ (1 − 10%) − 20% = 2.22%

Module 6: Priced rounds and notes

Use these formulas when you read a term sheet with a pool, or when a note converts. The lessons are convertible notes, the option pool shuffle, and a full Series A example.

Note balance = principal
  × (1 + yearly rate × years)
  $500K × (1 + 7% × 1.5) = $552,500

Note shares = balance ÷ the lower of
  the cap price and the
  discount price
  $552,500 ÷ $1.00 = 552,500

Effective pre-money = pre-money
  − pool % × post-money
  $40M − 10% × $50M = $35M

Shares after a round with a new pool
  = (shares before − unissued pool)
    ÷ (1 − new money % − pool %)
  12,500,000 ÷ (1 − 20% − 12%)
  = 18,382,353

Module 7: Cap tables and dilution

Use these formulas to plan your ownership across several rounds. The lessons are dilution across rounds and pro rata rights.

Ownership after rounds = start
  × (1 − dilution 1)
  × (1 − dilution 2)
  100% × 0.80 × 0.80 = 64%

Ownership after a round that tops up
an existing pool
  = before
  × (1 − new money % − pool %)
    ÷ (1 − unissued pool % before)
  60.35% × 70% ÷ 95% = 44.47%

Pro rata amount
  = ownership × new money
  12% × $20M = $2.4M

Module 8: Employee equity

Use these formulas to read an option offer and to plan an exercise. The lessons are reading an offer and exercise and taxes.

Offer ownership = options ÷ fully
                  diluted shares
  40,000 ÷ 18,382,353 = 0.218%

Cost to exercise = options × strike
  40,000 × $0.40 = $16,000

Spread = (fair market value
  − strike) × options
  ($5 − $1) × 40,000 = $160,000

ISO limit: $100,000 of grant-date
  value can first become
  exercisable each year
  $400,000 exercisable in year 1
  → $100,000 ISO, $300,000 NSO

AMT, single filer, 2026, simplified
  = 26% × (salary + ISO spread
           − $90,100) − regular tax
  26% × ($150K + $160K − $90.1K)
  − $24,734 = $32,440

Module 9: Term sheets

Use these formulas to compare what two term sheets pay you. The lessons are liquidation preferences, anti-dilution, and two offers.

Non-participating payout
  = the larger of the preference
    and % × sale
  $10M for 20%, $40M sale → $10M

Participating payout = preference
  + % × (sale − preference)
  $10M + 20% × $30M = $16M

Capped participation: the payout
  stops at the cap, and the holder
  converts when % × sale is more
  than the cap
  3x cap = $30M, reached at $110M,
  conversion at more than $150M

Conversion point = multiple × money
                   ÷ ownership
  1 × $10M ÷ 20% = $50M

Broad-based weighted average
  CP2 = CP1 × (A + B) ÷ (A + C)
  $5.00 × 11M ÷ 12M = $4.58

Full ratchet: CP2 = the new price
  $5.00 → $2.50

Preference with cumulative dividends
  = money × (1 + rate × years)
  $10M × (1 + 8% × 5) = $14M

In the weighted average, A is the shares before the new round, and B is the new money ÷ CP1. C is the new shares that the round actually sells. The participating formula applies when the sale price is more than the preference.

Module 10: Exits

Use these formulas to calculate what a sale pays you. The lessons are how startups exit, the waterfall, find the flip, and QSBS.

Value of each common share
  = (sale − preferences kept)
    ÷ (common + converted shares)
  ($120M − $30M) ÷ 11M = $8.18

Cash at the closing = price − escrow
  $100M − 10% → $90M at the closing,
  $10M minus claims at month 12

Secondary discount
  = 1 − secondary price
        ÷ last preferred price
  1 − $12 ÷ $15 = 20%

QSBS, stock acquired after
July 4, 2025
  3 years → 50% of the gain excluded
  4 years → 75% excluded
  5 years → 100% excluded
  Limit: $15M, or 10 × basis
  if that is larger
  $15M gain, 5 years
  → $0 federal tax

Module 11: Raising a round

Use these formulas to plan when to raise and how much. The lessons are when to raise and how much, build an investor pipeline, close the round, and alternatives to VC.

Raise = monthly burn
  × months of runway
  × (1 + cushion)
  $125K × 24 × 1.2 = $3.6M

Start of the next raise
  = month when the cash ends
    − (months to raise + buffer)
  28 − (4 + 6) = month 18

Commitments = contacts
  × meeting rate
  × second-meeting rate
  × commitment rate
  80 × 40% × 30% × 30% ≈ 3

Form D due = date of first sale
             + 15 days
  March 3, 2026 → March 18, 2026

Revenue-based financing
  Total to repay = advance × cap
  $500K × 1.4 = $700K
  Months = total ÷ (share × monthly
           revenue)
  $700K ÷ (6% × $400K) = 29.2
  → 30 payments

The rates in the pipeline example are assumptions, not market data. If day 15 is a weekend day or a federal holiday, Form D is due on the next business day.

Module 12: Y Combinator and accelerators

Use these formulas to compare accelerator deals. The lessons are the YC deal and comparing accelerators.

Implied post-money
  = fixed cash ÷ fixed percentage
  $125K ÷ 7% = $1.79M

YC part = 7% + $375K ÷ next SAFE cap
  7% + $375K ÷ $15M = 9.5%

Blended valuation = all cash
                    ÷ all percentage
  $500K ÷ 9.5% = $5.26M

Price of the program
  = fixed percentage × cap without
    the program − fixed cash
  7% × $20M − $125K = $1.275M

Module 13: Capstone

These formulas come from run the company and the final exam.

Founders' part of a sale when a 1x
non-participating Series A keeps its
preference and all others convert
  = founders % ÷ (1 − Series A %)
    × (sale − preference)
  45% ÷ 80% × ($40M − $10M)
  = $16.875M

Normalized gain = (after − before)
                  ÷ (100% − before)
  (70% − 40%) ÷ 60% = 0.5

Numbers to compare with

Market numbers change each quarter. Use these numbers to compare your round with other rounds, and look at the period of each number.