How to Calculate Post-Money Valuation

Understanding how to calculate post-money valuation is crucial for founders, investors, and employees. This metric determines ownership percentages and the value of equity stakes after an investment round.

Pre-Money vs Post-Money Valuation

Pre-Money Valuation

• Company value BEFORE new investment
• Negotiated between founders and investors
• Basis for determining investor ownership percentage

Post-Money Valuation

• Company value AFTER new investment
• Pre-money valuation + investment amount
• Used to calculate final ownership percentages

Basic Calculation Formula

Post-Money Valuation = Pre-Money Valuation + Investment Amount

Example:

• Pre-money valuation: $4 million
• Investment amount: $1 million
• Post-money valuation: $4M + $1M = $5 million

Calculating Ownership Percentages

Investor Ownership % = Investment Amount ÷ Post-Money Valuation

Using our example:

• Investor ownership: $1M ÷ $5M = 20%
• Existing shareholders: 80%

Practical Examples

Series A Example:

• Pre-money: $8 million
• Investment: $2 million
• Post-money: $10 million
• Investor gets: 20% ownership

Multiple Investors:

If multiple investors participate:

• Total investment: $2 million
• Each investor's % = Their investment ÷ Post-money valuation

Factors Affecting Valuation

1. Revenue and growth rate
2. Market size and opportunity
3. Team experience
4. Competitive landscape
5. Traction and metrics

Common Mistakes

1. Confusing pre and post-money terms
2. Not accounting for option pools
3. Ignoring liquidation preferences
4. Forgetting about convertible securities

Use our Cap Table Simulator to model how different valuations affect your ownership structure across multiple funding rounds.