This study examines how risk evolves in private, venture capital backed companies. It finds that the stochastic Ito processes assumed for public companies probably apply to young, private companies as well. However, the parameters, drift rate and standard deviation, are generally higher. Venture capitalists have viewed companies as evolving through stages, and this study assesses the probabilities of success and failure at each stage. The underlying process of price evolution appears much smoother than the stage model may suggest. The valuation mediods developed for public securities, including option pricing, should apply to private companies as well. This study is a step toward measuring the needed parameters