Financial Calculators
Startup Valuation Calculator
The post and pre-money valuation calculator simplifies the math so you can focus on more important tasks when you're negotiating startup valuation.
Pre-Money and Post-Money Valuation Calculator
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Table of contents
| ◦Pre-money and Post-money Valuation |
| ◦Pre-Money |
| ◦Post-Money |
| ◦Calculating Post-Money Valuation |
| ◦Calculating Pre-Money Valuation |
Pre-money and Post-money Valuation
It is easy to see the difference: pre-money valuation refers to the value of the company before any investment is made into it. The post-money valuation is the value of a startup after the money has been invested. Pre-money value is $10 million for a startup that allows you to store goat photos in the cloud. ACME Venture Capital invests $2.5 Million in a Series A round. The company now has $10M of its assets, plus $2.5M cash. It's worth $12.5million. ACME now owns 20% of the company, which is $12.5 million.
Pre-Money
The value of a company before it receives any funding from outside sources is called pre-money valuation. Pre-money can be described as the amount a startup is worth before it receives any investment. 1 This valuation not only gives investors an idea about the current value, but also the value of each share.
Post-Money
Post-money, on the other hand, refers to the value of the company after it has received the money and investments. 2 This includes any outside financing or capital injection. Because they are crucial concepts in the company's valuation, it is important to understand which one is being referred to.
Let's use an example to illustrate the difference. Let's say an investor wants to invest in a startup tech company. Both the investor and the entrepreneur agree that the company is worth $1,000,000 and will invest $250,000.
The percentage of ownership will vary depending on whether the valuation is pre-money or post-money. The company's $1 million pre-money valuations will value it at $1 million. After the investment, it will be worth $1.25million. It is called post-money if the $1 million valuation includes the $250,000 investment.
Calculating Post-Money Valuation
It is very simple to calculate the post-money value. This formula will help you determine the post-money valuation.
Post-money valuation = Investment dollar amount / percent investor receives
If an investment of $3 million nets 10% to an investor, then the post-money value would be $30 million
$3 million / 10% = $30 million
Keep this in mind. This does not mean that the company was valued at $30,000,000 before receiving a $3,000,000 investment. Why? That's easy. This is because the balance sheet shows a $3 million increase in cash value, which increases its value by the same amount.
In situations where entrepreneurs have a great idea but limited assets, the difference between pre-money or post-money is crucial.
Calculating Pre-Money Valuation
The pre-money value of a company is determined before any funding is received. This figure gives investors an idea of the current value of the company. It is not difficult to calculate the pre-money value. It does require an extra step, however. This is only after you have calculated the post-money value. Here's how it works:
Pre-money Valuation = Investment amount
Let's take the above example to show the pre-money value. The pre-money value in this example is $27 million. This is because we subtract the investment amount and the post-money value. We calculate it using the formula below:
$30 million - $3 million = $27 million
It is easier to calculate the per-share value of a company's pre-money value. You will need to do the following:
Per-share value = Total number of outstanding shares / Pre-money valuation
Article author
Parmis Kazemi
Parmis is a content creator who has a passion for writing and creating new things. She is also highly interested in tech and enjoys learning new things.
Startup Valuation Calculator English
Published: Fri Jun 10 2022
In category Financial calculators
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