Startup Valuation Calculator

Calculate pre-money and post-money valuation, investor ownership, and founder dilution in seconds.

Results

Post-money valuation

$6,000,000

$5,000,000 pre-money + $1,000,000 invested

Investor ownership: 16.7%; Investment / post-money
Founders after the round: 83.3%; Less investor and pool
Founder dilution: 16.7%; From the new shares
Price per share: $0.5000; Pre-money / shares before
New shares issued: 2,000,000; Investment / price
Shares after the round: 12,000,000; Before + new

The investor pays $1,000,000 for 16.7% of a company worth $6,000,000 after the money comes in. Founders and existing holders keep 83.3%.

Cap table before and after

100%

83%17%$6M post

Before the roundAfter the round

Founders and existing holders
Option pool
New investor

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The math

How a priced round works

Startup valuation determines what a company is worth at any given point in time. This valuation is used to establish equity ownership percentages, calculate investor returns, and determine how much equity is given up in funding rounds.

Pre-money valuation is the company’s estimated value before the investment round. It is the baseline that investors and founders agree on before any new capital is added.
Post-money valuation is the company’s value after the investment is added: pre-money plus the investment amount. A $5 million pre-money company that raises $1 million is worth $6 million post-money.
Ownership follows from the two. The investor’s stake is the investment divided by the post-money valuation, and new shares are issued at the pre-money price per share to deliver it.

The difference between pre-money and post-money determines how much equity the investor receives. A higher pre-money valuation means founders give up less equity for the same investment amount, which is why pre-money valuation is often the main point of negotiation in funding rounds.

Post-money       = pre-money + investment
Price per share  = pre-money / shares before the round
New shares       = investment / price per share
Investor %       = investment / post-money
Founder equity % = shares before / total shares after
Dilution %       = new shares / total shares after

Assumptions and simplifications

One priced equity round. SAFEs and convertible notes that convert in the round are not modeled; use the SAFE conversion calculator for those.
The option pool is treated as a share of the company after the round that comes out of the founders’ stake. Real term sheets often size the pool before the money (the “option pool shuffle”), which lowers the effective pre-money.
Shares outstanding should be fully diluted. Liquidation preferences and other terms do not change ownership and are not modeled.

Worked example

$1,000,000 on a $5,000,000 pre-money

Post-money: $5,000,000 + $1,000,000 = $6,000,000
Price per share: $5,000,000 / 10,000,000 = $0.5000
New shares: 2,000,000
Shares after: 12,000,000
Founders keep: 83.3%

Investor owns16.7%

Dilution

Understanding dilution

Dilution is a fundamental concept in startup equity. It refers to the decrease in an owner’s equity percentage when new shares are issued. Understanding dilution is crucial for founders to manage their long-term ownership and control of their company.

What causes dilution?

New investment rounds: When investors buy shares, new shares are issued, diluting existing shareholders.
Employee options: When companies grant stock options to employees, this dilutes founder and investor stakes.
Convertible instruments: Convertible notes and SAFEs convert to equity at future milestones, causing dilution.
Advisor options: Advisors often receive equity, which also dilutes existing shareholders.

The dilution formula

Dilution % = (New shares issued / Total shares after) x 100

While dilution reduces ownership percentage, it’s typically beneficial for founders if the investment helps the company grow faster than the dilution amount. A 20% dilution that helps the company grow 3x in value is a winning trade for founders, as their remaining 80% stake is now worth more in absolute terms.

Valuation dynamics across rounds

As a company raises multiple funding rounds, the pre-money valuation for each new round is typically based on the post-money valuation of the previous round. This creates a series of increasing valuations that track the company’s progress and increased value over time. Early-stage companies should expect significant dilution from multiple funding rounds, with founder ownership potentially decreasing from 100% to 20-30% by Series C.

Minimizing dilution

Negotiate higher pre-money valuations: The higher the pre-money, the less dilution you take for the same investment.
Raise larger rounds: Raising $5M once dilutes less than raising $1M five times.
Manage the option pool: Keep your option pool reasonable (typically 10-15% for Series A companies).
Use non-dilutive funding: Revenue, grants, and revenue-based financing don’t dilute equity.

Methods

Valuation methods for startups

There are several approaches to valuing startups, each appropriate for different stages of company development. Investors and founders use these methods to establish a fair pre-money valuation for funding rounds.

Comparable company analysis (comps)

This method values a startup by comparing it to similar companies that have raised funding recently. If similar startups in your space are valued at $10 million, you’d expect a comparable valuation. The challenge is finding truly comparable companies and adjusting for differences in growth, market size, and traction.

Discounted cash flow (DCF)

DCF projects future cash flows and discounts them back to present value. While mathematically rigorous, DCF is rarely used for early-stage startups because the revenue projections are highly speculative. It works better for more mature startups with established business models and revenue visibility.

Venture capital method

This is the most common method used in venture capital. Investors estimate the company’s value at exit (typically 7-10 years out), determine their required return (typically 3-10x), and work backward to calculate today’s pre-money valuation. For example: If you expect a $100M exit and want a 5x return on a $1M investment, the pre-money valuation would be $4M.

Scorecard valuation

This method compares a startup against industry averages and other factors. Key factors include the team, product, market size, potential ROI, and stage of development. Each factor is weighted and compared to the average, resulting in a valuation multiple applied to a baseline valuation.

Revenue multiple method

For startups with significant revenue, companies are often valued at a multiple of annual recurring revenue (ARR) or monthly recurring revenue (MRR). SaaS companies might be valued at 5-10x ARR, while marketplaces might be valued at 2-5x gross merchandise volume. This method works well for revenue-generating startups but not for pre-revenue companies.

Cost-plus method (pre-revenue)

For very early-stage startups, valuation is often based on the cost of capital raised plus a markup. Friends and family rounds might be priced at $0.50 per share, with no complex valuation method. The valuation is simply whatever price the parties agree to that represents fair value for the current stage.

Frequently Asked Questions

Common questions about the Startup Valuation calculator and the math behind it.

What is the difference between pre-money and post-money valuation?

Pre-money valuation is the company's value before the investment round, while post-money valuation is the value after the investment is added. Post-money = Pre-money + Investment Amount. For example, if a company is valued at $5 million pre-money and receives $1 million in investment, the post-money valuation is $6 million. The investor would own 1/6 (16.7%) of the company at that valuation.

How is investor ownership percentage calculated?

Investor ownership percentage is calculated by dividing the investment amount by the post-money valuation and multiplying by 100. The formula is: (Investment Amount / Post-Money Valuation) × 100. This represents the equity stake the investor receives. For example, if an investor invests $1 million in a company with a $6 million post-money valuation, they own (1/6) × 100 = 16.7% of the company.

What causes founder dilution in a funding round?

Founder dilution occurs when new shares are issued to investors. While the absolute number of founder shares stays the same, the percentage ownership decreases because the total number of shares outstanding has increased. If a founder owns 10 million shares out of 10 million total (100%), and the company issues 2.5 million new shares to investors, the founder's 10 million shares now represent only 80% of the total 12.5 million shares.

How does option pool affect valuation?

The option pool is reserved equity set aside for employee incentives. When calculating investor ownership, the option pool is typically deducted from the post-money valuation before allocating shares. This reduces both the investor's and founder's effective stake proportionally. For example, with a $6 million post-money valuation and a 10% option pool, the investable base is $5.4 million, giving the investor a smaller stake than the raw calculation would suggest.

What is price per share in a funding round?

Price per share is calculated by dividing the investment amount by the number of new shares issued. Formula: Price Per Share = Investment Amount / New Shares Issued. This price represents the valuation per share for the new investment round and determines how many shares the investor receives. For example, if an investor invests $1 million and the price per share is $0.40, they receive 2.5 million new shares (1,000,000 ÷ 0.40).

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