You can calculate pre money valuation and post money valuation with our money valuation calculator. It is a simple to use tool, all you have to do is input two variables that are required for the process of calculation. Namely, the investment amount and investor’s equity share.
With these two variables entered, our little gizmo would measure the pre and post money valuation of your company based on the pre and post-money valuation formula.
Pre and post money differ in the duration of valuation. Both pre-money and post-money are valuation metrics of companies and are important in measuring the worth of the given company.
Pre-money valuation refers to the value of a company excluding the external or the latest wave of funding. It is best explained as how much a startup could be valued before it begins to obtain any venture capital into the company.
This value measurement does not just give venture capitalists an idea of the current worth of the business, it also provides the value of each issued share.
On the other end, post-money valuation implies how much the company is worth after it collects the venture capital and investments into it. This valuation includes outside financing or the most recent capital poured in.
The difference between the pre-money and the post-money valuation of a company matters because at the end of the day, it defines the equity share that venture capitalists are entitled to after the funding round is over.
For instance, if a venture capitalist invests $400,000 in a company, he/she would be entitled to an equity share of 20 percent if the pre-money valuation of the company were set at $2 million.
This share jumps to 25 percent if its pre-money valuation were set at $1.6 million. This can have radically sensitive legal and financial repercussions on the company long after the funding round is over.
Post-money valuation is extremely easy to determine. Use the following formula:
Post-Money Valuation = \( \dfrac{Investment Dollar Amount}{Percent Investor Receives}\)
Let’s assume an investor invests $33 and the respective percentage for that investment in the company is 1%.
We can apply the above formula:
Post-money valuation = \( \dfrac{33}{1} = \$33\)
Determining-pre money valuation is a no-brainer. Remember that this value of a company comes before it receives any financial capital. Naturally, this figure gives investors an insight of what the company would be valued in the current time.
One important requirement for the calculation of pre-money is that you should know the post-money valuation of the company.
Here goes the formula:
Pre-Money Valuation = \(\mathbf{Post Money Valuation - Investment Amount} \)
So, we know that the pre-money value of the company stood at \(\$23 \mathbf{\small{million}}\).
As has been discussed above, you can use our calculator and skip all the math if you find it boring.
And that’s it. It would reveal both the pre-money and post-money valuation of the company in question.
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