How do you calculate post-money valuation of a startup?

It’s very easy to determine the post-money valuation. To do so, use this formula: Post-money valuation = Investment dollar amount ÷ percent investor receives.

How is Pre-money valuation done?

Pre-money valuation refers to the value of a company excluding the latest round of funding. Simply put, pre-money valuation evaluates the worth of the startup before it steps out to receive the next round of investment. This includes outside financing or the latest rounds of funding.

How do you calculate valuation of money?

Calculating post-money valuation is straightforward. You take the dollar amount of the investment and divide it by the percent that the investor is getting. In our example above $2 million is divided by 10\% yielding a post-money valuation of $20 million.

Is pre-money valuation enterprise value?

The Pre-Money Valuation reflects the Enterprise Value of the business today. Enterprise Value (“EV”) measures the true value of a startup, as it ignores the type of external funding in place (i.e. equity, debt).

What is a pre-money valuation cap?

A valuation cap is pre-money: the ‘cap’ or limit is placed on the starting valuation of the company before the financing round. This process protects investors against dilution should the starting valuation of the company increase significantly between funding.

How much do pre-money and post-money venture capital valuations dilute each other?

If you raise a new round venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25\% (2.5m / 10m).

What does pre-money mean for startups?

Pre-money is best described as how much a startup might be worth before it begins to receive any investments into the company. This valuation doesn’t just give investors an idea of the current value of the business, but it also provides the value of each issued share.

How do I raise the most money for my startup?

One is, go big or go home. Raise as much as possible at the highest valuation possible, spend all the money fast to grow as fast a possible. If it works you get a much higher valuation in the next round, so high in fact that your seed round can pay for itself.

What happens when you raise $10 million in venture capital?

If you raise a new round venture capital (say $2.5 million at a $7.5 million pre-money valuation, which is a $10 million post-money) you get diluted by 25\% (2.5m / 10m). So you own 15\% of the new company but that 15\% is now worth $1.5 million or a gain of $1.1 million.