Pre & Post Money Valuation

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Pre-money val

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Post-money val

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What is Pre and Post Money Valuation ?

The Pre and Post Money Valuation Calculator works backward from a new investment and the ownership percentage received by that investor. Post-money valuation describes the agreed company value immediately after the new money, while pre-money valuation removes that new cash from the post-money figure.

This relationship is a useful first check for a straightforward priced equity round. It does not value a business from its revenue, assets or prospects. Instead, it shows the valuation implied by two proposed deal terms, assuming the stated percentage is the investor’s ownership immediately after the financing.

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How to Use This Calculator

  1. Enter the amount of new investment in dollars. Use the amount that actually participates in the ownership calculation.
  2. Enter the investor’s post-financing equity percentage as a number greater than zero and no more than 100. Enter 20 for 20%, rather than 0.20.
  3. Choose Calculate. The page divides the investment by the percentage written as a decimal to find post-money valuation.
  4. It then subtracts the new investment to find pre-money valuation. Both figures are displayed with two decimal places.

The calculation assumes one simple relationship. Options, warrants, convertible securities, multiple closing amounts, transaction costs or changes to an employee option pool can change the ownership picture described in actual financing documents.

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Formula Used

Post-money valuation = investment ÷ (investor equity % ÷ 100). Pre-money valuation = post-money valuation − investment.
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Variables Explained

ItemMeaning in this calculationCheck before use
InvestmentNew money exchanged for the stated ownership interest.Use one currency and confirm whether fees are excluded.
Investor equityThe investor’s percentage immediately after this financing.Confirm whether it is measured on a fully diluted basis.
Post-money valuationThe implied company value after including the new investment.Compare the definition with the term sheet.
Pre-money valuationThe implied company value immediately before adding this investment.Check option-pool and convertible-security treatment.

“Equity” can describe different bases. A percentage of issued shares may differ from a fully diluted percentage that assumes outstanding options or other rights become shares. The arithmetic is only as reliable as the ownership definition supplied.

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Worked Example

An investor proposes $200,000 for 20% of the company after the round. Convert 20% to 0.20. Post-money valuation = $200,000 ÷ 0.20 = $1,000,000. Pre-money valuation = $1,000,000 − $200,000 = $800,000.

As a simple ownership check, the existing holders retain 80% after the round. Eighty percent of the $1,000,000 post-money figure is $800,000, matching the calculated pre-money amount under these assumptions.

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Why Use This Calculator?

The outputs describe an implied valuation, not a guaranteed sale price or an independent appraisal. They make the proposed investment and ownership percentage internally consistent under a simple priced-round model. A different percentage or a different definition of shares will produce a different valuation.

Read the figure beside the deal documents. A pre-money option-pool increase can dilute existing holders before the new investor enters. Convertible notes or SAFEs may convert at a cap or discount. Preferred shares can carry economic rights that make equal percentage ownership different from equal outcomes. None of those provisions appears in the two inputs.

For a real offering, reconcile the result to a current capitalization table and the exact language in the term sheet. Founders and investors may need qualified legal, tax and financial advice. This calculator does not establish whether a security is suitable, compliant or fairly priced.

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Common Mistakes

    • Entering 0.20 for 20%; the percentage field expects 20.
    • Using a pre-financing ownership percentage where the formula needs post-financing ownership.
    • Calling post-money value the amount of cash in the company’s bank account.
    • Ignoring the definition of fully diluted shares, the option pool or convertible instruments.
    • Mixing amounts stated in dollars, thousands and millions.
    • Treating an implied valuation as a professional appraisal or certain exit value.
    • Entering zero equity, which would require division by zero and is rejected.
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Frequently Asked Questions

Is post-money valuation the same as cash raised?

No. Cash raised is the investment amount. Post-money valuation is the whole company value implied by that amount and the percentage acquired.

Should I enter 15 or 0.15 for a 15% stake?

Enter 15. The calculator divides the percentage by 100 before using it in the formula.

Why is zero percent rejected?

Finding valuation requires division by the ownership fraction. A zero fraction makes that division undefined and cannot imply a finite valuation from this formula.

Does the result account for an employee option pool?

No. The two-field calculation has no option-pool input. Check whether the quoted ownership is fully diluted and whether a pool increase occurs before or after the investment.

Can I use this calculation for a SAFE or convertible note?

Only with care. Those instruments may use caps, discounts and conversion terms that do not match a direct exchange of current cash for a stated post-round percentage.

Does a valuation tell me what the company will sell for?

No. It records an implied value under specified financing terms. A later transaction can use a very different price, capital structure and set of rights.

Why should I compare the answer with the capitalization table?

The capitalization table shows which shares, options and other interests make up ownership. It helps confirm that the percentage in the formula uses the same basis as the deal documents.

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Sources & References

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