Pre-Money Valuation Calculator
This tool calculates the pre-money valuation of a company based on the amount of investment received and the percentage of equity the investor obtains immediately after the investment (the post-money percentage).
Understanding pre-money valuation is crucial in funding rounds as it determines the company's worth before new capital is injected, influencing share price and equity distribution.
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Understanding Pre-Money Valuation
What is Pre-Money Valuation?
Pre-money valuation is the valuation of a company or asset *before* a new investment or funding round takes place. It's essentially what the company is deemed to be worth on its own merits and future prospects, prior to receiving additional capital.
What is Post-Money Valuation?
Post-money valuation is the valuation of a company *after* an investment or funding round has been completed. It is calculated by adding the new investment amount to the pre-money valuation.
The Relationship & Formulas
The relationship between Pre-Money Valuation, Post-Money Valuation, and the Investment Amount is fundamental:
Post-Money Valuation = Pre-Money Valuation + Investment Amount
The investor's ownership percentage (calculated *after* the investment) provides the key to finding the post-money valuation from the investment amount:
Post-Money Valuation = Investment Amount / Investor's Ownership Percentage (as a decimal)
Combining these, we get the formula this calculator uses for Pre-Money Valuation:
Pre-Money Valuation = (Investment Amount / Investor's Ownership Percentage (as a decimal)) - Investment Amount
Where 'Investor's Ownership Percentage (as a decimal)' is the percentage divided by 100 (e.g., 20% is 0.20).
Example Calculation (Based on Calculator Logic)
EX: An investor puts in $1,000,000 for 20% of the company (post-money).
1. Post-Money Valuation = Investment Amount / Investor's Percentage (decimal)
Post-Money Valuation = $1,000,000 / 0.20 = $5,000,000
2. Pre-Money Valuation = Post-Money Valuation - Investment Amount
Pre-Money Valuation = $5,000,000 - $1,000,000 = $4,000,000
Result: The Pre-Money Valuation is $4,000,000.
Pre-Money Valuation Examples
Common scenarios illustrating pre-money valuation calculations:
Example 1: Seed Round Investment
Scenario: A startup receives $500,000 in seed funding.
Known Values: Investment Amount = $500,000, Investor Gets = 25% post-money.
Calculation:
Post-Money Valuation = $500,000 / 0.25 = $2,000,000
Pre-Money Valuation = $2,000,000 - $500,000 = $1,500,000
Result: Pre-Money Valuation = $1,500,000.
Conclusion: The company was valued at $1.5 million before this funding round.
Example 2: Series A Funding
Scenario: A growing company raises $3,000,000 in Series A funding.
Known Values: Investment Amount = $3,000,000, Investor Gets = 20% post-money.
Calculation:
Post-Money Valuation = $3,000,000 / 0.20 = $15,000,000
Pre-Money Valuation = $15,000,000 - $3,000,000 = $12,000,000
Result: Pre-Money Valuation = $12,000,000.
Conclusion: The company was valued at $12 million before the Series A investment.
Example 3: Small Angel Investment
Scenario: An angel investor provides $50,000.
Known Values: Investment Amount = $50,000, Investor Gets = 10% post-money.
Calculation:
Post-Money Valuation = $50,000 / 0.10 = $500,000
Pre-Money Valuation = $500,000 - $50,000 = $450,000
Result: Pre-Money Valuation = $450,000.
Conclusion: The company was valued at $450,000 before this angel investment.
Example 4: High Percentage, Lower Investment
Scenario: An investment of $100,000 gives the investor 50% of the company.
Known Values: Investment Amount = $100,000, Investor Gets = 50% post-money.
Calculation:
Post-Money Valuation = $100,000 / 0.50 = $200,000
Pre-Money Valuation = $200,000 - $100,000 = $100,000
Result: Pre-Money Valuation = $100,000.
Conclusion: A high percentage given for the investment implies a relatively low pre-money valuation ($100k).
Example 5: Low Percentage, Higher Investment
Scenario: An investment of $5,000,000 gives the investor only 10% of the company.
Known Values: Investment Amount = $5,000,000, Investor Gets = 10% post-money.
Calculation:
Post-Money Valuation = $5,000,000 / 0.10 = $50,000,000
Pre-Money Valuation = $50,000,000 - $5,000,000 = $45,000,000
Result: Pre-Money Valuation = $45,000,000.
Conclusion: A low percentage given for a large investment implies a high pre-money valuation ($45 million).
Example 6: $2M Investment for 40%
Scenario: A company receives a $2,000,000 investment for 40% equity.
Known Values: Investment Amount = $2,000,000, Investor Gets = 40% post-money.
Calculation:
Post-Money Valuation = $2,000,000 / 0.40 = $5,000,000
Pre-Money Valuation = $5,000,000 - $2,000,000 = $3,000,000
Result: Pre-Money Valuation = $3,000,000.
Conclusion: The pre-money valuation is $3 million.
Example 7: Small Business Investment
Scenario: A local business gets a $75,000 investment for 15% of the company.
Known Values: Investment Amount = $75,000, Investor Gets = 15% post-money.
Calculation:
Post-Money Valuation = $75,000 / 0.15 = $500,000
Pre-Money Valuation = $500,000 - $75,000 = $425,000
Result: Pre-Money Valuation = $425,000.
Conclusion: The pre-money valuation is $425,000.
Example 8: Large Growth Equity Round
Scenario: A mature startup raises $20,000,000 in a growth round.
Known Values: Investment Amount = $20,000,000, Investor Gets = 8% post-money.
Calculation:
Post-Money Valuation = $20,000,000 / 0.08 = $250,000,000
Pre-Money Valuation = $250,000,000 - $20,000,000 = $230,000,000
Result: Pre-Money Valuation = $230,000,000.
Conclusion: The pre-money valuation is $230 million, indicating a high value before this large investment.
Example 9: Early Stage with Convertible Note Conversion
Scenario: A $250,000 convertible note converts into equity during a funding round where new investors get 20% post-money.
Note: This is a simplified example. Convertible note conversions can be complex (caps, discounts). We'll assume the $250k converts at the terms of the *new* money for this calculation purpose.
Known Values: Investment Amount (converted note amount) = $250,000, Investor Gets = 20% post-money (This 20% includes the noteholder's resulting equity share).
Calculation:
Post-Money Valuation = $250,000 / 0.20 = $1,250,000
Pre-Money Valuation = $1,250,000 - $250,000 = $1,000,000
Result: Pre-Money Valuation = $1,000,000.
Conclusion: In this simplified model, the pre-money valuation before this round (and note conversion) is $1 million.
Example 10: Investor Requires Specific Pre-Money
Scenario: An investor wants to invest $1,000,000 and agrees the pre-money valuation should be $4,000,000. What percentage do they get?
Note: This calculator works the other way (inputs are investment and *percentage*), but we can use the formulas to check.
Known Values: Investment Amount = $1,000,000, Desired Pre-Money Valuation = $4,000,000.
Calculation:
Post-Money Valuation = Pre-Money Valuation + Investment Amount
Post-Money Valuation = $4,000,000 + $1,000,000 = $5,000,000
Investor's Ownership Percentage (decimal) = Investment Amount / Post-Money Valuation
Investor's Ownership Percentage (decimal) = $1,000,000 / $5,000,000 = 0.20
Investor's Ownership Percentage = 0.20 * 100 = 20%
Result: The investor would get 20% of the company post-money.
Conclusion: To achieve a $4M pre-money valuation with a $1M investment, the investor receives 20% equity.
Frequently Asked Questions about Pre-Money Valuation
1. What is Pre-Money Valuation?
Pre-money valuation is the value of a company immediately before a new investment is made. It's the valuation agreed upon by investors and the company for the existing business.
2. How is Post-Money Valuation different?
Post-money valuation is the value of the company *after* the investment has been added. It equals the Pre-Money Valuation plus the Investment Amount.
3. How does this calculator work?
This calculator takes the Investment Amount and the Investor's agreed-upon Post-Money Ownership Percentage to first calculate the Post-Money Valuation (Investment / Percentage). Then, it subtracts the Investment Amount to find the Pre-Money Valuation.
4. Why is the Investor's Percentage entered as "Post-Money"?
The investor's ownership percentage is typically calculated based on the total shares outstanding *after* the investment shares are issued. This represents their stake in the company's new, higher post-money value.
5. Can the investor percentage be 0% or 100%?
For a typical equity investment round, the percentage must be greater than 0% (otherwise, no equity was given for the investment). While technically 100% is possible (the investor buys the whole company), it's not a standard funding "round" calculation, and the calculator is designed for equity-for-cash scenarios where existing owners retain some percentage.
6. What are the limitations of this calculation?
This is a simplified calculation based on the agreed investment amount and percentage. It doesn't account for complex cap tables, option pools, liquidation preferences, or multiple classes of stock, which can affect the true economics per share.
7. What units should I use for the Investment Amount?
Use a consistent currency unit (e.g., USD, EUR, GBP). The resulting valuations will be in the same currency unit.
8. Where do the Investment Amount and Investor's Percentage come from?
These values are determined during funding round negotiations between the company and the investors, based on the company's performance, market conditions, potential, and comparable deals.
9. If I know the Pre-Money Valuation and Investment Amount, how do I find the percentage the investor gets?
Calculate Post-Money Valuation (Pre-Money + Investment). Then, Investor Percentage (decimal) = Investment Amount / Post-Money Valuation. Multiply by 100 for the percentage.
10. Why is calculating pre-money important?
It's crucial for determining the share price at which the investment is made, how much ownership dilution existing shareholders will experience, and for tracking the company's growth and valuation over time through subsequent funding rounds.
