# Startup Valuation Calculator | Pre and Post-Money > Calculate pre-money and post-money valuation, ownership, dilution, and price per share for a startup round. Free valuation calculator for angels and founders. URL: https://raziel.co/tools/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 Track all your startup investments in Raziel Manage your cap table, track dilution round by round, and understand your equity in one place. [Start free](https://app.raziel.co/sign-up) 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. 1. **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. 2. **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. 3. **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 owns**16.7%** 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. ## Further reading - [Raziel Learn Understanding Startup Valuation Methods](https://raziel.co/learn/understanding-startup-valuation-methods) - [Raziel Learn Post-Money SAFE vs Pre-Money SAFE: What to Log So Ownership Does Not Drift](https://raziel.co/learn/post-money-vs-pre-money-safe-tracking) - [Raziel Learn How to Track Private Company Valuations Between Rounds](https://raziel.co/learn/private-company-valuation-tracking) ## 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). Related tools ## More free *calculators* [All tools](https://raziel.co/tools) - [Startups and SAFEs SAFE Conversion Calculator Shares and ownership when a SAFE converts in a priced round. Open calculator](https://raziel.co/tools/safe-conversion-calculator) - [Startups and SAFEs Angel Portfolio Simulator Power-law outcomes, expected returns and odds of losing money. Open calculator](https://raziel.co/tools/angel-portfolio-simulator) - [Startups and SAFEs Convertible Note Calculator Accrued interest, conversion price and shares for a convertible note. Open calculator](https://raziel.co/tools/convertible-note-calculator)