Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Pre-money valuation, the new investment amount, and post-money valuation are three numbers locked together by one simple relationship, so a founder or investor negotiating any one of the three without checking its effect on the other two can end up agreeing to a different ownership split than either side actually intended.
Before you rely on it
What to check
Confirm all three figures, pre-money, investment amount, and post-money, are mutually consistent before finalizing a term sheet, since any two of the three fix the third automatically.
The common error
Where people go wrong with pre-money & post-money valuation calculator
Negotiating a headline valuation number without checking how it interacts with the investment amount to determine the resulting ownership percentages. The actual dilution can come as a surprise if only one of the three linked figures was actually scrutinized.
Sensitivity evidence
How pre-money valuation changes the investor post-money ownership
| Pre-money valuation | Investor post-money ownership | Holder ownership after financing |
|---|---|---|
| $6,400,000 | 23.8% | 76.2% |
| $7,200,000 | 21.7% | 78.3% |
| $8,000,000worked example | 20.0% | 80.0% |
| $8,800,000 | 18.5% | 81.5% |
| $9,600,000 | 17.2% | 82.8% |
Every input, tested
Which input moves the investor post-money ownership most
| Input | Tested from | To | Investor post-money ownership at each end | Swing |
|---|---|---|---|---|
| New investment | $1,800,000 | $2,200,000 | 18.4% to 21.6% | 3.2% (16%) |
| Pre-money valuation | $7,200,000 | $8,800,000 | 21.7% to 18.5% | 3.2% (16%) |
| Current holder ownership | 98.0% | 102.0% | 20.0% to 20.0% | none |
Two variables at once
Investor post-money ownership by pre-money valuation and new investment
| Pre-money valuation \ New investment | $1,600,000 | $2,000,000 | $2,400,000 |
|---|---|---|---|
| $6,400,000 | 20.0% | 23.8% | 27.3% |
| $7,200,000 | 18.2% | 21.7% | 25.0% |
| $8,000,000 | 16.7% | 20.0% | 23.1% |
| $8,800,000 | 15.4% | 18.5% | 21.4% |
| $9,600,000 | 14.3% | 17.2% | 20.0% |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Pre-money valuation | $8,000,000 |
| New investment | $2,000,000 |
| Current holder ownership | 100.0% |
| Investor post-money ownership | 20.0% |
| Holder ownership after financing | 80.0% |
Where the inputs come from
Pre-money valuation is the value of the company before the new investment, as negotiated with the investor, new investment is the amount raised in the round, and current holder ownership is the percentage held by the existing owner or group before the round. Post-money valuation equals pre-money plus the new investment. Use the term sheet's numbers, and remember that an option pool increase may sit in the pre-money and dilute existing holders further.
When the result stops applying
Real rounds add option pools, convertible securities and multiple investors, which change the ownership math. Preferred stock terms such as liquidation preferences and anti-dilution rights affect the value of shares as much as the percentage. Valuation is only one term among many, and a high valuation with harsh terms can be worse than a lower one with clean terms.
What to compare it with
See dilution over several rounds on the startup dilution calculator, and how notes convert on the SAFE conversion and convertible note pages. The option pool dilution calculator shows the effect of a bigger pool. Model each term sheet before signing.
People also ask
Frequently asked questions
What is the difference between pre-money and post-money valuation?
Pre-money is the company's value before the investment, and post-money is that value plus the new money raised.
How do I calculate an investor's ownership?
Divide the investment by the post-money valuation. Two million into a ten million post-money valuation buys 20%.
Why does the option pool matter?
If the pool is created before the round, it lowers the effective pre-money valuation for existing holders, since the new shares dilute them alone.