Startup value.
Ready to Calculate
Enter values on the left to see results here.
Found this tool helpful? Share it with your friends!
The Pre/Post Money Valuation tool is designed to provide immediate clarity on startup equity distribution during a funding round. In practical usage, this tool serves as a critical bridge between a founder's perceived company value and the actual ownership percentage an investor receives after capital is injected. From my experience using this tool, it is most effective when used to simulate different investment scenarios to understand how varying capital amounts impact the final valuation and dilution levels.
Pre-money valuation refers to the agreed-upon value of a company before it receives any outside investment or the latest round of funding. It represents the baseline worth of the business based on its assets, intellectual property, team, and market potential.
Post-money valuation is the value of the company immediately after the investment is completed. It is the sum of the pre-money valuation and the total amount of new capital invested during the round. This figure is used to calculate the percentage of the company that investors own.
Accurate valuation calculations are essential for maintaining a clean capitalization table. When I tested this with real inputs, it became clear that even minor discrepancies in the pre-money figure can lead to significant shifts in equity ownership. These metrics are important because:
This tool processes inputs by establishing a linear relationship between the value of the company and the cash injected. In practical usage, the tool typically requires two of the three primary variables: the investment amount, the pre-money valuation, or the desired equity percentage.
Based on repeated tests, the most common workflow involves inputting the pre-money valuation and the investment amount to derive the post-money valuation. The tool then calculates the investor's ownership by dividing the investment by the post-money total. This provides a snapshot of the post-round ownership structure.
The fundamental relationship between pre-money and post-money valuation is expressed through the following formulas:
Post\text{-}Money\ Valuation = Pre\text{-}Money\ Valuation + Investment\ Amount
Investor\ Ownership\ \% = \frac{Investment\ Amount}{Post\text{-}Money\ Valuation}
Pre\text{-}Money\ Valuation = Post\text{-}Money\ Valuation - Investment\ Amount
Price\ Per\ Share = \frac{Pre\text{-}Money\ Valuation}{Total\ Pre\text{-}Round\ Shares}
While there is no single "correct" valuation, standard patterns emerge in startup financing. Based on my experience using this tool to analyze various funding stages, the following benchmarks are frequently observed:
High pre-money valuations are not always ideal, as they set a high "bar" for the next round of funding. If the company does not grow sufficiently to justify an even higher valuation later, it may face a "down round," which is significantly detrimental to founder equity.
| Input: Pre-Money | Input: Investment | Result: Post-Money | Result: Investor Equity |
|---|---|---|---|
| $2,000,000 | $500,000 | $2,500,000 | 20.00% |
| $5,000,000 | $1,000,000 | $6,000,000 | 16.67% |
| $8,000,000 | $2,000,000 | $10,000,000 | 20.00% |
| $15,000,000 | $5,000,000 | $20,000,000 | 25.00% |
Example 1: Calculating Post-Money and Equity A startup agrees to a $4,000,000 pre-money valuation and secures an investment of $1,000,000.
Example 2: Determining Pre-Money from Equity Target An investor wants to own 10% of a company by investing $2,000,000.
When using this free Pre/Post Money Valuation tool, it is important to understand the underlying assumptions:
What I noticed while validating results across various scenarios is that users often confuse the denominator in the equity calculation. This is where most users make mistakes:
Investment / Pre-Money is a common error. This results in an inflated ownership percentage that does not reflect the actual post-investment cap table.Using the Pre/Post Money Valuation tool provides a rigorous framework for negotiating and finalizing startup investment terms. From my experience using this tool, its primary value lies in its ability to strip away the complexity of equity math, allowing founders to focus on the strategic implications of their valuation. By clearly distinguishing between the company's value before and after capital injection, users can ensure transparency and accuracy in their long-term capitalization strategy.