Home
Back
Pre Money Valuation Formula:
| From: | To: |
Pre Money Valuation refers to the value of a company before it receives external funding or investment. It's a crucial metric in venture capital and startup financing that helps determine the ownership percentage investors will receive for their investment.
The calculator uses the simple formula:
Where:
Explanation: The post-money valuation includes the investment amount, so subtracting the investment gives you the pre-money valuation.
Details: Pre money valuation is essential for determining equity distribution, negotiating investment terms, and understanding the company's worth before new capital injection. It directly impacts founder dilution and investor ownership percentages.
Tips: Enter the post-money valuation and investment amount in dollars. Both values must be positive numbers, and the investment cannot exceed the post-money valuation.
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 is the value after investment (pre-money + investment amount).
Q2: How is pre-money valuation determined in real scenarios?
A: It's typically negotiated between founders and investors based on company performance, market potential, traction, and comparable company valuations.
Q3: Why is pre-money valuation important for founders?
A: It determines how much equity founders give up for the investment. A higher pre-money valuation means less dilution for existing shareholders.
Q4: What factors influence pre-money valuation?
A: Revenue growth, market size, team experience, intellectual property, competitive landscape, and overall market conditions.
Q5: Can pre-money valuation be negative?
A: No, pre-money valuation should always be a positive value representing the company's worth before additional investment.