Last updated: 5 August 2026.
Quick answer. Enterprise Value and Equity Value are two key concepts in company valuation, particularly for startups. Enterprise Value represents the total value of a company, including both its operating and financial value: it is calculated by adding the company’s total financial debt to the value of its shares and subtracting its cash and short-term investments. Equity Value, by contrast, represents the value of the company from the shareholders’ perspective and is calculated by multiplying the number of shares outstanding by the price of each share. Which figure an investor should look at depends on whether they are assessing the business as a whole or their stake in it.
Enterprise Value (EV) and Equity Value (EV) are two key concepts in company valuation, especially in the case of startups. Both are used to determine the value of a company, but they do so in different ways.
Unfortunately, this quiz has a limited amount of entries it can recieve and has already reached that limit.
Enterprise Value
The Enterprise Value is the value of a company, also taking into account its net financial debt.
It is calculated by adding the total financial debt of the company to the value of its shares, while subtracting its cash and short-term investments.
The Enterprise Value represents the total value of a company, including both its operating and financial value.
Equity Value
Equity Value represents the value of a company from the shareholders’ perspective. It is calculated by multiplying the number of shares outstanding by the unit price of each share.
Why should an investor look at one or the other magnitude?
An investor should look at the Equity Value if he is interested in the value of the company from the shareholders’ perspective. This value is relevant for investors who hold shares in the company, as it tells them how much money they stand to gain if they sell their shares.
An investor should look at the Enterprise Value if he is interested in the total value of the company, including both its operating value and its financial value. This value is relevant for investors who are considering investing in the company, as it tells them how much money they have to pay to acquire the company.
What does an investor see in enterprise value that they don’t see in equity value?
Enterprise Value includes the company’s debt, while Equity Value does not. This means that Enterprise Value is a more complete indicator of a company’s value, as it takes into account both its ability to generate profits and its ability to meet its financial obligations.
In which types of companies is it more important to know (for an investor) enterprise value than equity value?
Enterprise Value is most important to know for investors in companies with a high level of debt. In these companies, debt can have a significant impact on the value of the company, so it is important to take this factor into account when valuing the company.
What type of debt should be included in enterprise value?
Enterprise Value includes all of the company’s debt, both financial debt and non-financial debt. Financial debt is the debt that the company has contracted with banks and other financial institutions. Non-financial debt is the debt that the company has contracted with suppliers, customers or employees.
Differences between EV and Equity Value
The main difference between EV and Equity Value is that EV includes the company’s debt, while Equity Value does not. This is because EV represents the total value of the company, including both its operating and financial value. Equity Value, on the other hand, represents the value of the company from the shareholders’ perspective only.
Another difference between EV and Equity Value is that EV is often used to value companies in mergers and acquisitions, while Equity Value is often used to value companies in financing rounds.
Applications in startup valuation
In the case of startups, EV and Equity Value are used to determine the value of the company for the purpose of valuing the startup and selling the startup. This value is often used to negotiate the sale price.
In the sale of the startup, EV and Equity Value are used to determine the selling price of the company. The sale price is usually negotiated between the buyer and the seller, and is based on a number of factors, including EV and Equity Value.
Conclusion and final Advice
Not understanding the difference between these two concepts says a lot about the businessman or entrepreneur. Do not hesitate to consult a financial advisor or a commercial lawyer or M&A lawyer if you have any doubts.
If you enjoyed this article, you may also find it interesting to read the following one:
For advice applied to your case, see our M&A practice area.
Don’t be left in doubt, get in touch. We’ll be happy to help and offer you solutions.
Frequently asked questions
Enterprise Value is the value of a company taking into account its net financial debt. It is calculated by adding the company’s total financial debt to the value of its shares, while subtracting its cash and short-term investments. It represents the total value of the company, including both its operating value and its financial value.
Equity Value represents the value of a company from the shareholders’ perspective. It is calculated by multiplying the number of shares outstanding by the unit price of each share. It tells shareholders how much money they stand to gain if they sell their shares, which makes it the reference figure for investors who hold stakes in the company.
Both are used to determine the value of a company, but they do so in different ways. Enterprise Value measures the total value of the business, incorporating net financial debt alongside the value of the shares, whereas Equity Value measures only what the company is worth to its shareholders, based on the number of shares outstanding and their price.
An investor should look at Equity Value when they are interested in the value of the company from the shareholders’ perspective. This figure is relevant for investors who hold shares in the company, because it indicates how much money they would stand to gain if they sold their shareholding.
Enterprise Value and Equity Value are key concepts in company valuation and are especially relevant in the case of startups, where investors need to distinguish between the value of the business as a whole and the value attributable to shareholders. Using one or the other consistently avoids misunderstandings when negotiating investments or share sales.
Contact
Don’t be left in doubt, get in touch. We’ll be happy to help and offer you solutions.
Related tool, free to use: the VC Intelligence dashboard.
