What is future value?
Future value (FV) is what a sum of money today will be worth at a defined date in the future, given an assumed rate of return. It is the mirror of present value: the same time-value-of-money logic, run forward instead of backward. The standard formula is FV = PV × (1 + r)n, where PV is the amount today, r the periodic rate and n the number of periods.
How future value is used
Investors use FV to compare outcomes across time: what a SAFE converting in three years must return to justify its risk, what an option pool refresh costs in exit value, what leaving cash idle costs against treasury yields. Compounding frequency matters: the same nominal rate compounds to more with monthly than annual periods, which is why comparisons should use effective annual rates. In venture practice most FV questions hide a discount rate debate; the formula is trivial, the assumption behind r is the negotiation.
A worked example
1,000,000 TL at 40 percent annual return for 3 years: FV = 1,000,000 × 1.40³ = 2,744,000 TL. The same million at 20 percent reaches 1,728,000 TL. The gap between those two numbers is the entire argument for risk-adjusted pricing: doubling the assumed rate nearly doubles the “fair” future claim, which is why aggressive projections inflate valuations mechanically.
What is the difference between future value and present value?
Direction. Future value grows today’s amount forward at a rate; present value discounts a future amount back to today. Both use the same rate mechanics, so any FV question can be restated as a PV question.
Why does compounding frequency change future value?
Because interest starts earning interest sooner. At 24 percent nominal, annual compounding turns 100 into 124 after a year; monthly compounding turns it into roughly 126.8. Contracts should therefore state both the rate and the compounding basis.
Where does future value show up in startup deals?
In liquidation preference multiples, in interest accruing on convertible notes, in ESOP exercise economics and in every exit model an investor runs before pricing a round.
Related terms: time value of money, liquidation preference.
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