1. What is a Pre and Post Money Calculator?

Definition: This calculator determines a company's valuation before (pre-money) and after (post-money) an investment round.

Purpose: It helps investors and entrepreneurs understand how an investment affects company valuation and ownership percentages.

2. How Does the Calculator Work?

The calculator uses the formulas:

Where:

• \( V_{pre} \) — Pre-money valuation (USD)
• \( S \) — Shares owned (dimensionless)
• \( P \) — Price per share (USD)
• \( V_{post} \) — Post-money valuation (USD)
• \( I \) — Investment amount (USD)

Explanation: The pre-money valuation is calculated by dividing shares owned by price per share. Post-money valuation adds the investment amount to the pre-money valuation.

3. Importance of Valuation Calculation

Details: Understanding pre and post-money valuations is crucial for equity dilution calculations, investment negotiations, and financial planning.

4. Using the Calculator

Tips: Enter the shares owned, price per share in USD, and investment amount in USD. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between pre and post-money?
A: Pre-money is the company's value before investment, while post-money includes the new investment.

Q2: How does this affect ownership percentages?
A: New investors get shares based on post-money valuation, diluting existing shareholders proportionally.

Q3: What if I know the pre-money valuation but not price per share?
A: You can rearrange the formula: \( P = \frac{S}{V_{pre}} \).

Q4: Does this include option pools?
A: No, option pools are typically calculated separately and affect effective ownership percentages.

Q5: How do I determine fair price per share?
A: Price per share is typically negotiated based on company performance, market conditions, and comparable valuations.