- Indicative pre money
- 8,000,000 EUR
- Post money
- 10,000,000 EUR
- Price per share
- 8 EUR
- Investor stake
- 20 %
Deriving valuations from investment and percentage sold
If a company raises a known amount for a known percentage of the company, post money valuation equals the amount raised divided by the percentage sold. Pre money valuation, the value assigned to the company before the new money is added, equals post money valuation minus the amount raised. If instead a founder starts from a target pre money valuation, post money valuation is simply pre money valuation plus the amount raised, and percentage sold is the amount raised divided by the post money valuation. See startup valuation for the mechanics.
- Amount raised: the new investment in this round
- Percentage sold: the share of the company given to investors for that investment
- Pre money valuation: the company's value immediately before the round
- Post money valuation: pre money valuation plus the amount raised
Pricing a one million euro seed round
A founder wants to raise 1 million euros and is prepared to sell 20 percent of the company. Post money valuation is 1 million divided by 0.20, giving 5 million euros. Pre money valuation is 5 million minus 1 million, giving 4 million euros. If the founder instead insists on a 4 million euro pre money valuation and wants to raise the same 1 million euros, this produces the same result: post money valuation of 5 million euros and 20 percent sold, since the two ways of stating the deal are equivalent, a distinction that matters when comparing offers across funding rounds.
Valuation at seed and early stages is largely a negotiated figure based on comparable deals, team, and market size, rather than a measurement derived from revenue or profit, a figure the equity calculator can turn into a personal payout estimate.
Complex terms that simple round math ignores
- The calculator assumes a simple priced round with no convertible instruments converting at the same time
- It does not account for an option pool being created as part of the round, which effectively raises the price paid by existing shareholders
- A calculated valuation is only realistic if investors are actually willing to invest at that price, the formula alone cannot confirm that
Pre money, post money: frequent points of confusion
- Is pre money or post money valuation more important to agree first?
- Term sheets should always state clearly whether a valuation is pre money or post money, since confusing the two changes the percentage sold significantly.
- Does an option pool affect this calculation?
- Yes. If a new pool is created as part of the round and counted within the pre money valuation, it increases the effective percentage given up by existing shareholders beyond the simple formula shown here.
- How is valuation set at pre revenue stage?
- It is typically negotiated based on comparable recent deals, the strength of the team, and market opportunity, rather than calculated from financial metrics.
General information for founders, not legal or tax advice. Thresholds and rates change, so confirm the current position with an adviser in the relevant country before granting.