Pre-money/Post-money Valuation Calculator

What This Calculator Does

The Pre-money/Post-money Valuation Calculator helps you quickly determine how a new investment impacts company ownership. By entering a pre-money valuation and an intended investment amount, you can instantly see the updated post-money valuation as well as the precise ownership percentages for both founders and investors. This tool is designed to simplify complex startup funding math, making it accessible for founders, investors, and anyone interested in the mechanics of equity dilution and valuation.

Whether you are negotiating a funding round or simply exploring the impact of potential investments, this calculator provides a reliable, user-friendly way to understand your position in the cap table. With clear outputs and straightforward inputs, you can make more informed financial decisions in less time.

How to Use This Calculator

1. Enter your company’s current Pre-money Valuation (the value of your business before the new investment).
2. Input the Investment Amount that you plan to receive or negotiate from an investor.
3. Click the calculate button to instantly view the Post-money Valuation, the Investor Ownership percentage, and the Founder Ownership percentage after the investment.
4. Review and interpret the results to understand how the financing round will affect your company’s ownership structure.
5. Adjust the values as needed to model different scenarios and compare outcomes before making a decision.

Definitions of Key Terms

Pre-money Valuation

The company’s estimated value immediately before a new investment is added. This figure reflects the worth of the business based solely on its current assets, performance, and prospects, without considering the incoming capital.

Investment Amount

The specific sum of money an investor will contribute in exchange for a share of company equity. This amount is added to the pre-money valuation to determine the new valuation.

Post-money Valuation

The total value of the company immediately after the investment is received. It is calculated by adding the investment amount to the pre-money valuation, representing the new basis for ownership percentages.

Investor Ownership

The percentage of the company that the new investor will own after the investment is made. This is based on the ratio of the investment amount to the post-money valuation.

Founder Ownership

The percentage of the company retained by the original founders and existing shareholders immediately after the investment. It reflects the dilution effect caused by issuing new shares to the investor.

Calculation Methodology

The calculator relies on foundational startup finance formulas to determine the impact of an investment. The core idea is that when an investor contributes new capital, the company’s value increases by that amount, and ownership percentages shift accordingly. Here is how the calculations are performed:

Post-money Valuation = Pre-money Valuation + Investment Amount

Investor Ownership (%) = (Investment Amount / Post-money Valuation) × 100

Founder Ownership (%) = (Pre-money Valuation / Post-money Valuation) × 100

Pre-money Valuation is the starting value of the company. Investment Amount is the sum being added by the new investor. Post-money Valuation becomes the new benchmark for determining all shareholders' stakes. The investor’s percentage is determined by dividing their investment by the post-money valuation, while founders’ ownership is the remainder, reflecting their proportional stake after dilution.

Practical Scenarios

• Raising Seed Funding: A startup with a pre-money valuation of $1 million receives a $250,000 investment. The calculator reveals the new ownership split, allowing both founders and investors to see precise percentages before finalizing the deal.
• Negotiating with Multiple Investors: If you are in discussions with several investors, you can input different investment amounts to instantly see how each scenario affects ownership and dilution. This empowers you to negotiate better terms and avoid giving away more equity than intended.
• Planning for Future Rounds: Founders considering multiple rounds of funding can use the calculator to forecast changes in ownership after each round, helping plan for long-term equity retention.
• Educational Purposes: Business students and aspiring entrepreneurs can use the calculator to understand the effects of investment on company valuation and ownership, making abstract concepts concrete and actionable.

Advanced Tips & Best Practices

• Model Different Valuation Scenarios: Experiment with a range of pre-money valuations and investment amounts to see how sensitive your ownership structure is to small changes. This helps in setting reasonable expectations and preparing for tough negotiations.
• Consider the Impact of Option Pools: If you plan to expand your employee option pool, factor this into your pre-money valuation, as it can further dilute founder ownership. Discuss with your investors whether the pool is included pre- or post-money.
• Use Realistic Valuations: Ensure your pre-money valuation reflects market standards and your company’s true stage. Over- or under-valuing your business can lead to unfavorable outcomes in both fundraising and future rounds.
• Understand Dilution Over Time: Use the calculator to simulate several rounds of funding to understand cumulative dilution. This long-term view can inform your fundraising strategy and help you retain meaningful control of the company.
• Communicate Clearly with Stakeholders: Share calculator results with co-founders and investors to ensure everyone understands the implications of new investments, minimizing surprises and aligning expectations.

Frequently Asked Questions (Optional)

Does this calculator account for convertible notes or SAFEs?

No, this calculator is designed for equity investments at a fixed valuation. Convertible notes and SAFEs involve additional variables like conversion discounts and valuation caps, which are not reflected here. For those scenarios, consider a specialized calculator.

What if there are multiple investors in the same round?

You can enter the total combined investment amount for the round to see the overall impact on ownership. To view individual investor percentages, run separate calculations for each investment or divide the results proportionally.

How accurate is the ownership percentage?

The calculator provides an accurate snapshot based on the inputs provided. However, actual ownership can also be affected by factors such as outstanding stock options, warrants, or other convertible securities not included in the basic calculation.