Startup Valuation Calculator (Basic)
This simple calculator helps you understand the concept of startup valuation based on a funding round. It calculates the Post-Money Valuation given the Investment Amount and the Equity Percentage offered to the investor.
Enter the amount of money invested and the percentage of the company equity given in exchange for that investment.
Enter Investment Details
Understanding Startup Valuation (Basic Model)
What is Startup Valuation?
Startup valuation is the process of determining the current worth of a young, often pre-revenue or early-revenue company. This is typically necessary when seeking investment.
Post-Money vs. Pre-Money Valuation
When a startup raises money, two key valuation figures are used:
- Pre-Money Valuation: The value of the company *before* the investment is made.
- Post-Money Valuation: The value of the company *after* the investment is made. This is the figure this calculator primarily determines.
Relationship Formula
The simple relationship between these figures in a funding round is:
Post-Money Valuation = Pre-Money Valuation + Investment Amount
And, based on the investment terms:
Investment Amount = Post-Money Valuation * (Equity Percentage Given / 100)
Rearranging the second formula gives the basis for this calculator:
Post-Money Valuation = Investment Amount / (Equity Percentage Given / 100)
Once the Post-Money Valuation is known, you can find the Implied Pre-Money Valuation:
Implied Pre-Money Valuation = Post-Money Valuation - Investment Amount
Basic Example Calculation
EX: An investor puts in $500,000 for 10% of the company.
Investment Amount = $500,000
Equity Percentage Given = 10% (or 0.10 as a decimal)
Post-Money Valuation = Investment Amount / (Equity Percentage / 100)
Post-Money Valuation = $500,000 / (10 / 100)
Post-Money Valuation = $500,000 / 0.10
Result: Post-Money Valuation = $5,000,000.
Implied Pre-Money Valuation = $5,000,000 - $500,000 = $4,500,000.
Startup Valuation Examples (Simple)
Here are 10 examples demonstrating the calculation:
Example 1: Seed Round
Scenario: A startup raises a small initial investment.
1. Known Values: Investment Amount = $100,000, Equity Percentage Given = 5%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $100,000 / (5 / 100) = $100,000 / 0.05
4. Result: Post-Money Valuation = $2,000,000. Implied Pre-Money = $1,900,000.
Conclusion: The round implies a post-investment value of $2 million.
Example 2: Angel Investment
Scenario: An angel investor provides funding.
1. Known Values: Investment Amount = $250,000, Equity Percentage Given = 8%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $250,000 / (8 / 100) = $250,000 / 0.08
4. Result: Post-Money Valuation = $3,125,000. Implied Pre-Money = $2,875,000.
Conclusion: This funding round values the company post-investment at just over $3.1 million.
Example 3: Series A Round (Lower)
Scenario: An early-stage venture capital round.
1. Known Values: Investment Amount = $1,000,000, Equity Percentage Given = 20%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $1,000,000 / (20 / 100) = $1,000,000 / 0.20
4. Result: Post-Money Valuation = $5,000,000. Implied Pre-Money = $4,000,000.
Conclusion: A $1M investment for 20% implies a $5M post-money valuation.
Example 4: Series A Round (Higher)
Scenario: A successful Series A round with higher valuation.
1. Known Values: Investment Amount = $3,000,000, Equity Percentage Given = 15%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $3,000,000 / (15 / 100) = $3,000,000 / 0.15
4. Result: Post-Money Valuation = $20,000,000. Implied Pre-Money = $17,000,000.
Conclusion: A $3M investment for 15% implies a $20M post-money valuation.
Example 5: Larger VC Round
Scenario: A significant investment from a venture capital firm.
1. Known Values: Investment Amount = $10,000,000, Equity Percentage Given = 25%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $10,000,000 / (25 / 100) = $10,000,000 / 0.25
4. Result: Post-Money Valuation = $40,000,000. Implied Pre-Money = $30,000,000.
Conclusion: A $10M investment for a quarter of the company implies a $40M post-money value.
Example 6: Small Friends & Family Round
Scenario: Early funding from personal network.
1. Known Values: Investment Amount = $25,000, Equity Percentage Given = 2%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $25,000 / (2 / 100) = $25,000 / 0.02
4. Result: Post-Money Valuation = $1,250,000. Implied Pre-Money = $1,225,000.
Conclusion: A small initial raise implies a post-money value of $1.25 million.
Example 7: Strategic Investor
Scenario: An investment from a company in a related industry.
1. Known Values: Investment Amount = $500,000, Equity Percentage Given = 7.5%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $500,000 / (7.5 / 100) = $500,000 / 0.075
4. Result: Post-Money Valuation = $6,666,666.67. Implied Pre-Money = $6,166,666.67.
Conclusion: This strategic investment implies a post-money valuation of approximately $6.67 million.
Example 8: High Equity Deal
Scenario: A deal where founders give up a larger stake.
1. Known Values: Investment Amount = $750,000, Equity Percentage Given = 30%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $750,000 / (30 / 100) = $750,000 / 0.30
4. Result: Post-Money Valuation = $2,500,000. Implied Pre-Money = $1,750,000.
Conclusion: Giving 30% for $750k implies a $2.5 million post-money valuation.
Example 9: Low Equity Deal
Scenario: A deal where founders give up a smaller stake, possibly due to strong position.
1. Known Values: Investment Amount = $2,000,000, Equity Percentage Given = 10%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $2,000,000 / (10 / 100) = $2,000,000 / 0.10
4. Result: Post-Money Valuation = $20,000,000. Implied Pre-Money = $18,000,000.
Conclusion: Raising $2M for 10% implies a strong $20 million post-money valuation.
Example 10: Micro-Investment
Scenario: A very small investment from an advisor or small angel.
1. Known Values: Investment Amount = $10,000, Equity Percentage Given = 1%.
2. Formula: Post-Money V = Investment / (Equity% / 100)
3. Calculation: Post-Money V = $10,000 / (1 / 100) = $10,000 / 0.01
4. Result: Post-Money Valuation = $1,000,000. Implied Pre-Money = $990,000.
Conclusion: Even a tiny investment implies a $1 million post-money valuation based on this simple model.
Important Notes on Startup Valuation
The calculation above is a fundamental concept used in fundraising, but real-world startup valuation is far more complex. Factors that influence actual valuations include:
- Market Size and Opportunity
- Team Experience and Track Record
- Traction (Users, Revenue, Growth)
- Business Model
- Competitive Landscape
- Intellectual Property
- Stage of Development
- Macroeconomic Conditions
- Negotiation between founders and investors
Different valuation methodologies (like Discounted Cash Flow, Market Comparables, Scorecard Method, Berkus Method) are used depending on the startup's stage and industry.
Frequently Asked Questions about Startup Valuation
1. What is Post-Money Valuation?
Post-Money Valuation is the value of a startup *after* a funding round has been completed and the investment cash is in the company's bank account.
2. What is Pre-Money Valuation?
Pre-Money Valuation is the value of the startup *before* a new investment is made. It's essentially the Post-Money Valuation minus the Investment Amount.
3. How is Post-Money Valuation calculated in this basic model?
It's calculated by dividing the total Investment Amount by the percentage of company equity (as a decimal) that the investor receives: Post-Money V = Investment Amount / (Equity Percentage / 100).
4. How do I calculate Pre-Money Valuation using this tool's output?
Once you have the Post-Money Valuation from the calculator, subtract the Investment Amount you entered: Pre-Money V = Post-Money V - Investment Amount. The tool also provides this figure for convenience.
5. What units should I use for the Investment Amount?
Use any consistent currency unit (e.g., USD, EUR, GBP). The resulting valuations (Post-Money and Pre-Money) will be in the same currency units.
6. Why is this calculator called "Basic"?
Because real-world startup valuation is a complex process involving many factors beyond just the investment amount and equity percentage. This calculator only shows the mathematical relationship implied by these two numbers in a simple funding scenario.
7. Can the Equity Percentage Given be 0% or 100%?
If the percentage is 0%, it means no equity is given for the investment, which isn't typical equity funding. If it's 100%, it means the investor bought the entire company for the investment amount. The calculator requires a percentage greater than 0 and typically less than or equal to 100 for meaningful calculation in a standard funding round context.
8. Does the calculator handle preferred stock or complex terms?
No, this basic calculator assumes a simple equity exchange (like common stock or fully diluted equivalent) and does not account for preferred stock liquidation preferences, option pools, vesting, or other complex terms found in real investment agreements. These all affect effective valuation.
9. Can I use this to determine how much equity to give up?
You can use it in reverse conceptually. If you have a target Pre-Money Valuation (based on other valuation methods) and you know how much money you want to raise (Investment Amount), you can calculate the implied Post-Money Valuation, and then figure out what percentage to give: Equity % = (Investment Amount / Post-Money Valuation) * 100. However, this calculator directly takes Investment and Equity% as input.
10. Is a higher Post-Money Valuation always better?
Generally, a higher valuation is seen as favorable for founders as they give up less equity for the same amount of investment. However, the valuation needs to be realistic and defensible based on the company's performance and market. An unrealistically high valuation can lead to problems in future funding rounds ("down round").
