1. What is a Pre and Post Money Valuation Calculator?

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

Purpose: It helps entrepreneurs and investors understand how an investment affects a company's valuation and ownership structure.

2. How Does the Calculator Work?

The calculator uses these 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 these valuations is crucial for determining equity dilution, negotiating investment terms, and assessing company growth.

4. Using the Calculator

Tips: Enter the shares owned, price per share, and investment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

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

Q2: How does this affect ownership percentage?
A: The investor's ownership percentage is calculated as (Investment / Post-money valuation) × 100.

Q3: What if I don't know the price per share?
A: You can calculate it if you know the pre-money valuation and total shares: P = S / V_pre.

Q4: Does this account for option pools?
A: No, this is a basic calculation. Option pools would typically be included in the pre-money valuation.

Q5: How accurate are these valuations?
A: They're mathematically precise based on inputs, but real-world valuations consider many additional factors.