1. What is Pre Money Valuation?

Pre Money Valuation refers to the valuation of a company before it receives new investment. It's used to determine how much equity the new investors will receive for their capital.

2. How Does the Calculator Work?

The calculator uses the pre money valuation formula:

Where:

• \( Investment \) — Amount of investment in USD
• \( Ownership \% \) — Percentage of company being given to investors

Explanation: The formula calculates the company's valuation before the investment by determining what the investment amount would buy at the negotiated ownership percentage.

3. Importance of Pre Money Valuation

Details: Pre money valuation is crucial for startups and investors as it determines the ownership stake the investors receive and affects future funding rounds.

4. Using the Calculator

Tips: Enter investment amount in USD and ownership percentage (between 0.0001% and 100%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between pre-money and post-money valuation?
A: Pre-money is the valuation before investment, post-money is pre-money plus the investment amount.

Q2: How is ownership percentage determined?
A: It's negotiated between founders and investors based on company potential, market conditions, and investment amount.

Q3: What are typical pre-money valuations for startups?
A: Varies widely by stage - from $1-5M for seed rounds to hundreds of millions for late-stage startups.

Q4: Does this work for convertible notes or SAFEs?
A: These instruments convert to equity later, typically at a discount to the next round's valuation.

Q5: How often should valuations be updated?
A: At each funding round, or when significant changes occur in the business or market.