Technical Documentation
Founder OS Methodology
Every number in the Founder Decision OS is derived from a documented formula. This page explains the logic behind each calculation so you can verify the maths, understand the assumptions, and know exactly where the outputs come from.
NTM Revenue — Why We Use Forward Revenue
The Founder OS prices your company using NTM revenue (Next Twelve Months) rather than trailing twelve months (TTM). This is the standard basis used by SaaS investors, venture capitalists, and public market analysts when valuing growth-stage companies.
Why NTM and not TTM? A company growing at 50% YoY is not worth the same as a company with the same trailing revenue but flat growth. Investors price what a business will generate over the next year, not what it generated last year. Using TTM systematically understates the valuation of high-growth companies and overstates the valuation of declining ones.
| Revenue Basis | £20k/month, 50% growth | Effective Multiple (SaaS 5.5×, sub-£1M penalty) |
|---|---|---|
| TTM (trailing) | £240,000 | £240k × 4.4 = £1,056,000 |
| NTM (forward) | £360,000 | £360k × 4.4 = £1,584,000 |
Note that NTM revenue also improves the operating margin calculation (the denominator grows), which can move a company above the profitability discount threshold. This is intentional — a company growing into profitability deserves a higher valuation than the same company measured at a single loss-making snapshot.
Market Multiple Valuation
The market multiple method applies a sector-specific revenue multiple to NTM revenue, then applies a series of adjustments to reflect company-specific risk and quality.
Sector multiples are based on January 2026 public market data for comparable companies. They represent the median EV/NTM Revenue multiple for publicly traded companies in each sector.
| Sector | Base Multiple | Source |
|---|---|---|
| SaaS / Software | 5.5× | Public SaaS comps, Jan 2026 |
| AI / ML | 10× | AI-focused public comps, Jan 2026 |
| Fintech | 4× | Fintech comps, Jan 2026 |
| E-commerce | 1.5× | E-commerce comps, Jan 2026 |
| Healthcare / MedTech | 3× | Healthcare comps, Jan 2026 |
| Consumer | 2× | Consumer comps, Jan 2026 |
| Enterprise Software | 6× | Enterprise comps, Jan 2026 |
| Marketplace | 3× | Marketplace comps, Jan 2026 |
| Other | 4× | Blended median, Jan 2026 |
Adjustments applied in sequence:
- Gross margin > 80%+1.5× to multiplePremium for high-margin businesses
- Gross margin < 50%−1.5× from multipleDiscount for low-margin businesses
- NTM Revenue < £1M× 0.8Size discount — illiquidity and execution risk
- Operating margin < −50%× 0.5Profitability discount — high burn relative to revenue
- Operating margin < −200%× 0.2Severe burn discount
- Scenario: Downside× 0.730% multiple compression
- Scenario: Upside× 1.220% multiple expansion
Triangulated Median — Four-Method Valuation Stack
No single valuation method is reliable in isolation. The Founder OS calculates four independent valuations and takes the median of the three closest values (excluding the outlier) as the authoritative pre-money for the dilution engine.
| Method | Basis | Best for |
|---|---|---|
| Market Multiple | NTM Revenue × Sector Multiple | Revenue-generating companies |
| DCF (Discounted Cash Flow) | Present value of projected free cash flows | Companies with 3-year projections |
| Scorecard | Benchmark pre-money adjusted for team, market, traction | Early-stage, pre-revenue |
| Risk Summation | Base valuation ± risk factor adjustments | Stress-testing assumptions |
The triangulated median is displayed explicitly in the Ownership Impact card so you can see exactly which pre-money the dilution calculation used. This prevents the common confusion where a founder sees a high market valuation but a different (lower or higher) dilution outcome.
Why median and not average? The average is sensitive to outliers — a DCF with very optimistic assumptions can inflate the average significantly. The median is more robust and better represents the central tendency of what different methodologies agree on.
DCF Model — Discounted Cash Flow
The DCF model projects free cash flow over three years using your inputs, then calculates a terminal value and discounts everything back to present value using your specified discount rate.
| Parameter | Default | Notes |
|---|---|---|
| Discount rate | 10% | Adjustable. Typical range: 8–25% for startups |
| Terminal growth rate | 2% | GDP-level long-run growth assumption |
| Year 1 revenue growth | From inputs | Overridden by active scenario |
| Year 2–3 revenue growth | From inputs | Scaled proportionally to scenario |
| Gross margin | From inputs (per year) | Improves with scale by default |
| CapEx | From inputs (per year) | Included in FCF; excluded from Operating Burn metric |
The DCF equity value is calculated as: Equity Value = Enterprise Value + Cash − Total Debt. This is the figure used in the valuation stack comparison.
Scenario Engine — Downside / Base / Upside
The Scenario Engine modifies the active growth and discount rate assumptions across the entire calculation chain — projections, DCF, key metrics, and valuation stack all update when you switch scenarios.
| Parameter | Downside | Base | Upside |
|---|---|---|---|
| Revenue growth (Year 1) | 50% of your input | Your input | 150% of your input |
| Discount rate | 20% | Your input (default 10%) | 12% |
| Market multiple adj. | ×0.7 | ×1.0 | ×1.2 |
| OpEx cost growth | 5%/year | 5%/year | 8%/year |
The Downside scenario represents a realistic adverse case: growth halves, investors demand a higher return (20% discount rate), and the market applies a 30% multiple compression. The Upside scenario represents execution above plan: growth exceeds forecast, investor confidence is higher (12% discount rate), and the market awards a 20% premium.
The active scenario is displayed as a badge on the Key Metrics Dashboard so you always know which assumptions are driving the numbers you see.
Key Metrics — Definitions and Formulas
| Metric | Formula | Notes |
|---|---|---|
| ARR | Scenario-projected Month-12 Revenue × 12 | Uses scenario growth rate, not current revenue |
| Operating Burn (excl. CapEx) | Monthly OpEx − Gross Profit | Recurring cash consumption; CapEx excluded |
| Runway | Cash Balance ÷ Total Monthly Burn (incl. CapEx) | Includes CapEx; may differ from Operating Burn |
| Burn Multiple | Monthly Burn ÷ Monthly Net New Revenue | < 1 = efficient; > 2 = concerning |
| Gross Margin | Gross Profit ÷ Revenue × 100 | Year 0 margin from inputs |
| LTV/CAC | (ARPU × Gross Margin) ÷ (Churn Rate × CAC) | Requires churn and CAC inputs |
| CAC Payback | CAC ÷ (ARPU × Gross Margin) | Months to recover customer acquisition cost |
| Quick Ratio | MRR Added ÷ MRR Lost | > 4 = strong growth efficiency |
Known Limitations and Assumptions
The Founder OS is a constraint engine, not a valuation service. The outputs are indicative and based on public market comparables and standard financial modelling conventions. The following limitations apply:
- 01Sector multiples are based on public market data from January 2026 and are not updated in real time. Private company multiples typically trade at a 20–40% discount to public comparables.
- 02The DCF model uses a simplified three-year projection window. Longer-horizon businesses (deep tech, biotech) require more sophisticated modelling.
- 03The triangulated median assumes all four methods are equally informative. In practice, some methods are more appropriate than others depending on company stage.
- 04The scorecard and risk summation methods use UK/Europe benchmarks (£2M average seed pre-money). These may not reflect US or other market norms.
- 05The tool does not account for liquidation preferences, anti-dilution provisions, or other term sheet mechanics that materially affect founder economics.
- 06All outputs are in GBP (£). Currency conversion is not applied to sector multiples or benchmark valuations.