How the Risk Index is built.

Guiding Principles.

The Round Z Pre-IPO Risk Index exists to answer a single question: which pre-IPO companies carry governance, valuation, and disclosure risks that secondary-market quotes do not capture?

Five principles govern how the Index is built and maintained:

1. Public records only. Every input is sourced from PACER federal court filings, SEC S-1 and Form D disclosures, public secondary-market transaction data, state regulatory enforcement records, CFIUS public reviews, or Round Z's proprietary diligence database (built from publicly auditable inputs). Methodology can be independently reproduced.
2. Companies cannot pay. No rated company has paid, can pay, or has been offered the opportunity to pay for inclusion, exclusion, or modification of their grade. The Index is funded by Round Z's marketplace operations and B2B licensing revenue.
3. Quarterly refresh. Grades update every 90 days. Material grade changes are timestamped and historical trajectories are preserved on every company profile.
4. Subscore transparency. Every grade decomposes into five public subscores. Investors and counsel can see precisely which dimension is driving the composite score up or down.
5. Right of correction. Companies named in the Index may submit documented corrections via the published Appeals process (Section 7). Corrections are reviewed within 30 days and either accepted with evidence, partially accepted with footnote, or declined with reasoning published.

The Six Data Sources.

The Risk Index is constructed from six independent public-record sources. No single source can move a grade by more than 35% — the composite is designed to be resilient against any individual data-source error or gap.

The Five Subscore Dimensions.

Each rated company receives five subscores, each itself letter-graded A+ to F. The composite Pre-IPO Risk Grade is computed from a weighted blend of the five.

Governance Risk

Measures the integrity of the company's governance structure. Inputs include: board composition and independent-director majority status, founder voting control (supervoting share structures), independent committee structure (audit, compensation), prior governance crises (board removals, founder dismissals), cross-investment exposure with founder-controlled peers, and disclosed shareholder rights agreements.

Valuation Methodology Quality

Measures the integrity of the valuation establishment process. Inputs include: 409A valuation methodology and frequency, last-round transparency, secondary-market pricing alignment with primary-round valuations, downround acceptance history (mature companies that have accepted appropriate revaluation), and disclosed cap-table structure quality.

Secondary-Market Liquidity

Measures the availability of secondary-market exit liquidity. Inputs include: presence on regulated secondary platforms (Forge, EquityZen, Hiive, NPM), tender offer history and frequency, employee selling availability, bid-ask spread tightness, and transaction volume on secondary platforms.

Financial Disclosure Quality

Measures the integrity of the company's disclosure to accredited investors. Inputs include: financial statement audit firm quality (Big 4 vs. regional), revenue disclosure transparency, gross margin transparency, customer concentration disclosure, profitability disclosure, and consistency across investor communications.

Exit Probability

Measures the probability and timing of a future liquidity event (IPO or M&A). Inputs include: S-1 preparation indicators (banker selection, audit completion), regulatory exposure for U.S. exchange listing (CFIUS, antitrust), M&A optionality (strategic buyer landscape), founder stated preference (private vs. public), and market-conditions sensitivity.

Weighting & Composite Score.

Each subscore is converted from its letter grade to a 0-100 numeric value (A+ = 100, A = 95, A- = 90 ... F = 0), then weighted as follows to produce the Composite Score:

Why these weights? Governance Risk and Financial Disclosure Quality are heaviest because they correlate most strongly with downstream investor harm — concealment of structural issues produces the largest dollar-magnitude losses in pre-IPO secondary positions. Valuation Methodology is next because mispricing risk compounds across funding cycles. Exit Probability and Secondary-Market Liquidity affect timing and conversion of returns but are less predictive of permanent capital loss.

Letter-Grade Scale.

The Composite Score maps to a letter grade on the following scale:

Refresh Cycle.

Grades update quarterly on a fixed schedule:

• Q1 Edition — published March 31
• Q2 Edition — published June 30
• Q3 Edition — published September 30 (annual report companion)
• Q4 Edition — published December 31

Between quarterly refreshes, individual grades may be moved only in the event of a material structural development — for example, an S-1 filing, a Chapter 11 petition, a CFIUS divestiture order, a material founder departure, or a documented governance crisis. Such "interim grade movements" are timestamped, footnoted, and published on the affected company's profile within 7 business days of the triggering event.

Appeals & Corrections.

Any company named in the Index may submit a documented correction request. The process:

1. Email appeals@roundz.com with the subject line "Risk Index Correction Request — [Company Name]"
2. Attach the specific public-record citation or documented evidence supporting the requested correction.
3. Round Z reviews within 30 calendar days. Outcomes: (a) accepted with grade update, (b) partially accepted with explanatory footnote on profile, or (c) declined with documented reasoning published.
4. If the requestor disputes the outcome, an independent third-party review is available via a published list of qualified third-party reviewers (corporate governance counsel, former securities regulators, academic specialists).

Investors and analysts may also submit documented additional-information reports through structured submission. Submissions become inputs for the next quarterly refresh but do not move a grade in isolation — they are aggregated with the six primary data sources.

Governance & Independence.

The Pre-IPO Risk Index is governed by Round Z's Research & Standards team, which operates independently of Round Z's marketplace and broker-dealer operations. The Research team's compensation is not tied to marketplace transaction volume, individual company inclusion or exclusion, or any rated company's relationship with Round Z.

Round Z's marketplace business may, separately, facilitate accredited investor transactions in pre-IPO companies that appear on the Risk Index. The Index Grade is one input to the marketplace's product offerings, but the Grade itself is not modified to favor any company for marketplace purposes. The Research team does not have visibility into, and is not consulted on, individual marketplace transactions or counterparty negotiations.

The Index is reviewed annually by an independent advisory committee that includes a former securities regulator, a corporate governance academic, and a registered investment advisor with pre-IPO experience. The advisory committee's recommendations are non-binding but are published in full in each Annual Report.

Methodology Changelog.

• Volume I, Q2 2026 — Inaugural publication. 40 pre-IPO companies rated across AI, infrastructure, fintech, defense, space, and consumer categories.
• Q3 2026 (planned) — Companion Annual Report publication. Methodology refinement RFC opened to public comment Sept 15 - Oct 31.
• Q4 2026 (planned) — Expansion to 65+ companies; additional sector coverage in biotech and climate.
• Volume II, Q1 2027 (planned) — First major methodology revision; updated weighting reviewed by advisory committee.