Glossary

Glossary

Canonical reference for all terminology, notation, and abbreviations used across the Startup Valuation Engine.

Valuation Terms

Term	Definition
Pre-money valuation	Company value before new investment capital is injected.
Post-money valuation	Company value after new investment: $$V_{post} = V_{pre} + \text{Investment}$$.
Terminal value	Estimated company value at a future exit event (IPO, acquisition).
Discount rate	Rate used to convert future cash flows to present value. Reflects risk and time preference.
Risk-free rate	Return on a zero-risk investment (typically US Treasury bonds).

Valuation Methods

Method	Category	Description
Scorecard Method	Core	Adjusts average regional valuation by weighted factor scores (team, product, market, etc.). See Core Methods.
Berkus Method	Core	Assigns dollar values to five risk-reduction milestones. Max $2.5M pre-revenue.
Risk Factor Summation	Core	Adjusts base valuation by 12 risk factors, each ±$250K per unit.
VC Method	Core	Works backward from expected exit value, discounting for target return.
Black-Scholes	Advanced	Option pricing model for startup equity as real options. Uses $$N(d)$$ cumulative normal.
Binomial Tree	Advanced	Discrete-time option pricing with up/down steps. Converges to Black-Scholes.
Monte Carlo	Advanced	Simulates thousands of scenarios for probabilistic valuation ranges.
Scenario Analysis	Advanced	Discrete probability-weighted scenarios (bull/base/bear).

Industry Metrics

Term	Industry	Definition
ARR	SaaS	Annual Recurring Revenue — committed subscription revenue per year.
MRR	SaaS	Monthly Recurring Revenue — ARR ÷ 12.
CAC	SaaS	Customer Acquisition Cost — sales & marketing spend ÷ new customers.
LTV	SaaS	Lifetime Value — average revenue per customer over their lifetime.
NRR	SaaS	Net Revenue Retention — revenue retained from existing customers (includes expansion).
Churn Rate	SaaS	Percentage of customers lost per period.
Magic Number	SaaS	SaaS efficiency: quarterly ARR growth ÷ prior-quarter S&M spend.
Rule of 40	SaaS	Growth rate + profit margin should exceed 40%.
GMV	Marketplace	Gross Merchandise Value — total transaction value through the platform.
Take Rate	Marketplace	Platform's revenue as % of GMV.
rNPV	Biotech	Risk-adjusted Net Present Value — clinical-stage asset valuation.
TRL	Hardware	Technology Readiness Level — 1 (basic principles) to 9 (proven in operation).

Financial Mathematics

Term	Symbol	Definition
Present Value	$$PV$$	Current value of future cash flows: $$PV = CF_t / (1 + r)^t$$.
Net Present Value	$$NPV$$	Sum of all discounted cash flows minus initial investment.
Expected Value	$$E[X]$$	Probability-weighted average: $$E[X] = \sum x_i \cdot P(X=x_i)$$.
Standard Normal CDF	$$N(d)$$	Cumulative probability up to $$d$$ under standard normal. Used in Black-Scholes.
Poisson Distribution	$$P(k;\lambda)$$	Probability of $$k$$ events in fixed interval: $$(\lambda^k e^{-\lambda}) / k!$$.
CAPM	—	Capital Asset Pricing Model: $$r = r_f + \beta(r_m - r_f)$$.
Beta	$$\beta$$	Measure of systematic risk relative to market.
Alpha	$$\alpha$$	Excess return over CAPM-predicted return (Jensen's alpha).
Country Risk Premium	$$CRP$$	Additional return demanded for investing in a specific country.
PPP	—	Purchasing Power Parity — exchange rate adjustment for inflation differentials.

Abbreviations

Abbreviation	Full Name
API	Application Programming Interface
CAPM	Capital Asset Pricing Model
CI	Continuous Integration
CRP	Country Risk Premium
DCF	Discounted Cash Flow
IPO	Initial Public Offering
MCP	Model Context Protocol
M&A	Mergers and Acquisitions
OPM	Option Pricing Model
P/E	Price-to-Earnings ratio
P/S	Price-to-Sales ratio
PWERM	Probability-Weighted Expected Return Method
SAFE	Simple Agreement for Future Equity
SaaS	Software as a Service
VC	Venture Capital
WACC	Weighted Average Cost of Capital

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See Notation for the canonical symbol table mapping mathematics to code.