1. What Are Pre and Post Money Valuations?

Pre-money valuation refers to the value of a company before it receives new investment, while post-money valuation is the value after the investment has been added. These valuations are crucial for determining how much equity investors receive in exchange for their capital.

2. How the Calculator Works

The calculator uses these formulas:

Where:

• \( Investment \) — The amount of money being invested
• \( New Ownership \) — The percentage of equity the investor will receive (in decimal form)
• \( Pre \) — The company's valuation before investment
• \( Post \) — The company's valuation after investment

Explanation: The formulas calculate how much the company is worth before and after receiving new investment based on how much equity the investor is getting.

3. Importance of Valuation Calculations

Details: Accurate valuation calculations are essential for founders to understand how much of their company they're giving up and for investors to evaluate the potential return on their investment.

4. Using the Calculator

Tips: Enter the investment amount in USD and the percentage of ownership the investor will receive. Both values must be positive numbers, and ownership percentage must be between 0-100%.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between pre and post money valuation?
A: Pre-money is the company's value before investment, post-money is pre-money plus the investment amount.

Q2: How is ownership percentage determined?
A: Ownership percentage = Investment / Post-money valuation.

Q3: What's a typical ownership percentage for seed rounds?
A: Seed investors typically take 10-25% ownership, but this varies widely.

Q4: How do you determine pre-money valuation?
A: Valuation is negotiated between founders and investors based on factors like traction, market size, and team.

Q5: What about dilution from future rounds?
A: Future investment rounds will dilute all existing shareholders unless they participate pro-rata.