Pre Money Valuation Calculator
Pre-money valuation is negotiation’s starting point. Calculate and justify valuations for fundraising.
How the Pre Money Valuation Calculator works
Apply multiple valuation methods appropriate to company stage. Calculate pre-money value and understand dilution implications.
Pre-money valuation determines founder equity. This calculator provides multiple approaches for strong negotiation positions.
How it works
Tutorial
Pre-money valuation represents company value before new investment capital is added. This figure is the primary negotiation point in fundraising because it, combined with investment amount, determines investor ownership percentage and founder dilution. Understanding how to calculate, justify, and negotiate pre-money valuations is essential for founders seeking investment and investors evaluating deals.
You have two options: use the calculator above to calculate pre-money valuations with multiple methods, or follow this guide to manually determine pre-money valuation.
The Formula
| Scenario | Formula |
|---|---|
| From Post-Money | Post-Money Valuation – Investment Amount |
| From Equity Offer | (Investment ÷ Equity %) – Investment |
| From Investor Perspective | Investment × ((100 – Equity %) ÷ Equity %) |
Step-by-Step Calculation
Let’s calculate pre-money valuation in various fundraising scenarios.
Scenario 1: Calculate Pre-Money from Investment Terms
An investor offers $1.5M for 25% equity. What’s the pre-money valuation?
| Step | Calculation | Result |
|---|---|---|
| Calculate implied post-money | $1,500,000 ÷ 0.25 | $6,000,000 |
| Subtract investment amount | $6,000,000 – $1,500,000 | $4,500,000 |
Calculation: ($1,500,000 ÷ 0.25) – $1,500,000 = $4,500,000 pre-money
Verification: Pre-money ($4.5M) + Investment ($1.5M) = $6M post-money; $1.5M ÷ $6M = 25% ✓
Scenario 2: Calculate Pre-Money from Post-Money Target
You want a $12M post-money valuation and need to raise $3M:
| Component | Value |
|---|---|
| Target Post-Money Valuation | $12,000,000 |
| Investment Amount | -$3,000,000 |
| Required Pre-Money Valuation | $9,000,000 |
Calculation: $12,000,000 – $3,000,000 = $9,000,000
Dilution Check: $3M ÷ $12M = 25% ownership for investors
Scenario 3: Justify Pre-Money Using Revenue Multiple
Calculate pre-money based on traction and comparables:
| Metric | Value |
|---|---|
| Annual Recurring Revenue (ARR) | $1,200,000 |
| Industry Multiple for Stage | × 8.0 |
| Justified Pre-Money | $9,600,000 |
Calculation: $1,200,000 × 8.0 = $9,600,000
Reasoning: Series A SaaS companies typically trade at 6-10x ARR; 8x is mid-range.
Scenario 4: Compare Different Investment Structures
Analyze three offers for $2M investment:
| Offer | Terms | Pre-Money | Post-Money | Dilution |
|---|---|---|---|---|
| A | $2M for 20% | $8,000,000 | $10,000,000 | 20.0% |
| B | $2M for 25% | $6,000,000 | $8,000,000 | 25.0% |
| C | $2M for 30% | $4,666,667 | $6,666,667 | 30.0% |
Calculation for Offer C: ($2,000,000 ÷ 0.30) – $2,000,000 = $4,666,667
Step 5: Calculate Founder Retention
Determine founder ownership after investment:
| Scenario | Pre-Money | Investment | Post-Money | Founders Keep |
|---|---|---|---|---|
| High Valuation | $10M | $2M | $12M | 83.3% |
| Mid Valuation | $8M | $2M | $10M | 80.0% |
| Low Valuation | $6M | $2M | $8M | 75.0% |
Calculation for High Valuation: $10M ÷ $12M = 83.3% retained
Step 6: Build Multiple Valuation Scenarios
Create range based on different methodologies:
| Method | Basis | Valuation |
|---|---|---|
| Revenue Multiple | $1.2M ARR × 8 | $9,600,000 |
| Comparable Companies | Similar startups average | $8,500,000 |
| Venture Capital Method | Exit value ÷ Target return | $7,200,000 |
| Berkus Method | Stage + team + product factors | $6,500,000 |
| Weighted Average | 40% / 30% / 20% / 10% | $8,410,000 |
Calculation: ($9.6M × 0.4) + ($8.5M × 0.3) + ($7.2M × 0.2) + ($6.5M × 0.1) = $8,410,000
Step 7: Account for Option Pool
Adjust for employee option pool creation:
| Component | Without Pool | With 15% Pool |
|---|---|---|
| Pre-Money Valuation | $8,000,000 | $8,000,000 |
| Option Pool Value | $0 | $1,411,765 |
| Founder Value | $8,000,000 | $6,588,235 |
| Investment | $2,000,000 | $2,000,000 |
| Post-Money | $10,000,000 | $10,000,000 |
| Investors Own | 20.0% | 20.0% |
| Founders Own | 80.0% | 65.9% |
| Option Pool | 0.0% | 14.1% |
Key Point: If option pool comes from pre-money, founders get diluted twice—once for the pool, once for investors.
Step 8: Create Negotiation Range
Establish floor, target, and ceiling:
| Position | Pre-Money | For $2M Investment | Dilution |
|---|---|---|---|
| Floor (walk away) | $6,000,000 | 25.0% to investors | High |
| Target (fair value) | $8,000,000 | 20.0% to investors | Moderate |
| Anchor (opening ask) | $10,000,000 | 16.7% to investors | Low |
Strategy: Open at $10M, expect to settle around $8M, don’t accept below $6M.
Step 9: Calculate Impact of Different Raise Amounts
Show how much to raise at $8M pre-money:
| Raise Amount | Pre-Money | Post-Money | Dilution | Founders Keep |
|---|---|---|---|---|
| $1.5M | $8.0M | $9.5M | 15.8% | 84.2% |
| $2.0M | $8.0M | $10.0M | 20.0% | 80.0% |
| $2.5M | $8.0M | $10.5M | 23.8% | 76.2% |
| $3.0M | $8.0M | $11.0M | 27.3% | 72.7% |
Insight: Raising $1.5M saves 4.2% dilution vs. $2M; raising $3M costs extra 7.3% dilution.
Final Answer: For a $2M raise at 20% dilution, pre-money valuation is $8,000,000, resulting in $10,000,000 post-money
What This Means
Pre-money valuation is the most important number in fundraising negotiations because it directly determines dilution. An $8M pre-money with $2M raise gives investors 20%; a $6M pre-money with the same $2M gives them 25%—that 5% difference could be worth millions at exit. Always calculate pre-money from any term sheet offer by dividing investment by equity percentage, then subtracting the investment amount. This reveals the true valuation being proposed and helps you negotiate effectively.
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