Market Capitalization
Also known as Market Cap, Mkt Cap, Market Value of Equity
Market capitalization is a listed company's equity value, calculated as current share price multiplied by total shares outstanding. Common size brackets used by index providers and regulators: mega-cap above $200B, large-cap $10B to $200B, mid-cap $2B to $10B, small-cap $250M to $2B, micro-cap below $250M. Exact thresholds vary by jurisdiction and provider.
Formula
Market Capitalization = Share Price * Shares Outstanding- Share Price
- Current market price per common share
- Shares Outstanding
- Total common shares issued and held by all shareholders
In depth
Market cap is the simplest valuation metric in public markets: share price multiplied by total shares outstanding. Outstanding shares come from a company's most recent periodic financial filing.
Two practical wrinkles matter for venture. First, "shares outstanding" can mean basic (issued common) or fully-diluted (basic plus options, warrants, RSUs, and convertibles). Public-market screeners typically report basic; M&A models and DCF builds use fully-diluted because that is the share base an acquirer must buy. Second, market cap is equity-only. A heavily-indebted listed company can have a small market cap and a much larger enterprise value, and venture comp work uses EV almost exclusively for that reason.
Common size brackets in widespread industry use are mega-cap above $200B, large-cap $10B to $200B, mid-cap $2B to $10B, small-cap $250M to $2B, and micro-cap below $250M. These are conventions, not legal definitions, and individual index providers (S&P, Russell, FTSE, MSCI) use slightly different cutoffs.
Why it matters
For a venture fund, market cap is the comp anchor. When modeling a Series B SaaS investment, the relevant public comp set is small-cap and mid-cap software companies, not the megacaps that dominate the indices. Pulling EV/Revenue multiples from public mid-caps and applying them to a private growth company is the standard exit-multiple build. The same logic runs in reverse for unicorn IPO modeling: a $5B private post-money translates to a small-cap public listing on day one.
Worked example
A public software company:
| Item | Value |
|---|---|
| Share price | $45.00 |
| Shares outstanding | 80M |
| Market cap | $3.60B |
| Total debt | $500M |
| Cash | $800M |
| Enterprise value | $3.30B |
| TTM revenue | $450M |
| EV/Revenue | 7.33x |
Market cap of $3.60B puts the company in the mid-cap bracket ($2B-$10B). The EV/Revenue of 7.33x is the multiple a comp model would harvest, not the equity-only Price/Sales which would inflate to 8.0x because cash exceeds debt.
Frequently asked
What's the difference between market cap and enterprise value?
Market cap is equity value only. Enterprise value (EV) adds total debt and subtracts cash and equivalents: EV = Market Cap + Debt - Cash. EV is the price an acquirer would pay for the whole business, market cap is what shareholders own. For unlevered companies with significant cash (most VC-funded tech), EV is meaningfully below market cap.
What counts as a unicorn in market cap terms?
A unicorn is a private company with a post-money valuation of $1 billion or more, a threshold coined by Aileen Lee in 2013. The public-market analog is small-cap to mid-cap. Decacorns (above $10B) cross into mid-cap territory. Hectocorns or super-unicorns (above $100B) sit in large-cap territory under the common brackets.
Why do private VC-backed valuations use 'post-money valuation' instead of 'market cap'?
Market cap requires a continuously quoted public price. Private companies have negotiated round prices on preferred stock, not common stock, and the headline post-money valuation simply multiplies the latest preferred price by the fully-diluted share count. The two concepts are analogous but the private number is a single-transaction implied value, not a market-clearing price.
Is market cap the same as fully-diluted market cap?
No. Basic market cap uses common shares outstanding from the company's most recent periodic financial filing. Fully-diluted market cap includes in-the-money options, RSUs, convertibles, and warrants. The fully-diluted number is what acquirers price against and what term sheet pre-money/post-money calculations use.