Equity Value

The total value of a business including both equity and debt, minus cash. Calculated as market capitalisation plus total debt minus cash and equivalents.

Net income divided by shareholders' equity, measuring the return generated on owners' invested capital. High ROE can indicate efficient use of equity but should be interpreted alongside leverage levels and the quality of earnings.

The measure of the value of goods and services produced, calculated as revenue minus the cost of purchased inputs (services, energy, and materials). GVA captures the value a company creates through its own activities and is a core productivity metric in the Opagio framework.

A common M&A pricing convention in which the enterprise value is expressed before accounting for the target's cash balances and debt obligations, which are then adjusted at completion to calculate the equity value payable to the seller. Under this convention, equity value equals enterprise value plus cash and cash equivalents less financial debt (including debt-like items such as pension deficits, deferred consideration, and unpaid tax).

The percentage ownership interest a shareholder holds in a company. Equity stakes determine voting rights, dividend entitlements, and the share of proceeds received in a sale or liquidation event.

The ownership stake held by a company's founders, typically established at incorporation and subject to dilution through subsequent funding rounds. Founders' equity is usually subject to vesting schedules and may carry different rights from investor shares, reflecting the intangible contribution of the founding team's vision and early-stage effort.

The cash a company generates from operations after deducting capital expenditures. FCF represents the cash available to pay dividends, reduce debt, or reinvest in the business, and is a key input in discounted cash flow valuations.

A contractual feature that gives an investor the right to share in additional value creation beyond a base return, commonly found in preferred equity and mezzanine instruments. Upside participation structures are designed to reward investors for the risk associated with backing intangible-driven growth, aligning their interests with the company's long-term value creation.

How do you value a franchise agreement as an intangible asset?

Franchise agreements are valued using the income approach based on the present value of franchise fee income and royalty streams over the remaining agreement term, adjusted for renewal probability.

What key metrics do Series A investors evaluate before investing?

Series A investors focus on monthly recurring revenue (typically £50-200K+), revenue growth rate (15-20% month-on-month), unit economics (LTV:CAC > 3:1), retention rates, and evidence of product-market fit.

How do you achieve and measure product-market fit?

Product-market fit is achieved when a product satisfies strong market demand — measured by retention rates, organic growth, the Sean Ellis survey (40%+ 'very disappointed'), and customers actively recommending the product.