Understanding your company’s pre-money and post-money valuation is crucial when securing investment.
This calculator helps you estimate these valuations based on the investment amount and the investor’s ownership percentage. Use it to see how different investment scenarios impact your company’s worth.
Pre and Post Money Valuation Calculator
Calculate your company’s pre-money and post-money valuation based on investor inputs.
How Pre-Money and Post-Money Valuations Are Calculated
Pre-money and post-money valuations are essential metrics in assessing a company’s value before and after receiving external investment.
To calculate pre-money valuation, we start by estimating the company’s current worth prior to any new capital infusion. This value is derived by subtracting the new investment amount from the total post-money valuation, which gives investors a clear view of the existing business’s standing.
Post-money valuation is calculated by adding the incoming investment to the pre-money valuation. This post-money figure shows the total worth of the business, including new investments, and sets the foundation for determining ownership distribution.
Formula for Post-Money Valuation:
\(\text{Pre-Money Valuation} = \text{Post-Money Valuation} – \text{Investment Amount}\)Formula for Pre-Money Valuation:
\(\text{Post-Money Valuation} = \text{Pre-Money Valuation} + \text{Investment Amount}\)Example: If a company has a pre-money valuation of $4 million and receives a $1 million investment, the post-money valuation is calculated as follows:
Understanding Ownership and Equity After Investment
When investors provide funding, their equity percentage depends on both the investment amount and the pre-money valuation.
For example, if an investor contributes $1 million with a pre-money valuation of $4 million, they would acquire a 20% stake in the company.
This calculation can be achieved by dividing the investment by the post-money valuation:
\(\text{Investor’s Equity (\%)} = \frac{\text{Investment Amount}}{\text{Post-Money Valuation}} \times 100\)Example: With a $1 million investment and a post-money valuation of $5 million:
\(\text{Investor’s Equity (\%)} = \frac{1,000,000}{5,000,000} \times 100 = 20\%\)Why Valuation Matters for Your Business Growth
Pre- and post-money valuations are more than numbers—they reflect your business’s growth potential, help in setting funding expectations, and guide future decision-making.
Accurate valuations attract investors by showing the company’s real market worth. Additionally, setting a clear valuation helps in defining ownership structure, informing financial projections, and aligning business goals.
More Tools: