This pre and post-money valuation calculator can be used to calculate the pre-money valuation and the post-money valuation of a business based on two numbers.
- The amount of the investment required from the investor.
- The percentage of the business you are prepared to sell to the investor in return for the investment.
The amount of investment required can be found in the financial projections template as part of the cash flow statement under the heading ‘Proceeds from issue of share capital’.
The percentage of the business you are prepared to sell in return for the investment will be a matter of negotiation between the business and the investor. It should be noted that the number refers to the percentage of the post-money valuation.
Calculating Pre and Post-Money Valuation
There are two formulas used to calculate the pre and post-money valuations.
Post-Money Valuation Formula
The post-money valuation is the valuation of the business after the investment has been made.
The post money calculation is performed by working out the percentage equity the investor owns after the investment, and using this and the amount of money injected, to value the whole business.
The post-money valuation formula can be stated as follow.
Pre-Money Valuation Formula
The pre-money valuation refers to the value placed on the business before the investment is made.
The pre-money valuation is simply the post-money valuation less the investment made by the investor. The pre-money valuation formula can be stated as follow.
Using the post-money valuation formula above the pre-money valuation formula can be restated as follow.
Pre and Post-Money Valuation Example
If a business is prepared to sell 25% of its equity in return for an investment of 210,000 then the pre post-money valuations are calculated as follows.
Post-money valuation = Investment / Equity % Post-money valuation = 210,000 / 25% = 840,000 Pre-money valuation = Post-money valuation - Investment Pre-money valuation = 840,000 - 210,000 = 630,000
The premoney valuation before the investment is made is calculated as 630,000. When the investment of 210,000 is received the value of the business rises by the same amount and the post-money valuation is therefore 840,000.
The pre and post-money valuation calculator allows a startup business to enter the amount of investment required and the percentage of equity in the business they are prepared to sell to the investor and then calculates the pre-money and post-money valuation based on these inputs.
Using the Pre and Post-Money Valuation Calculator
The purpose of this pre and post money valuation spreadsheet is to calculate startup valuations based on the input assumptions.
This free Excel calculator is available for download below and is used as follows:
Enter the Investment
Enter the amount of equity investment required to help fund the business.
The amount of investment required should be that shown in the cash flow statement of the financial projections template as ‘Proceeds from the issue of share capital. For example if the valuations are being calculated in year 1 and the additional equity required in year 1 is 210,000; enter 210,000 as the investment.
Enter the Equity %
Enter the equity percentage you expect to sell in return for the investment from the investor. The percentage is always a percentage of the post money valuation, so for example if the investor is to end up with 25% of the business after the investment has been made, enter 25% as the equity percentage.
The pre and post-money valuation calculator calculates the post-money valuation and then the pre-money valuation based on the input assumptions entered above.
Pre and Post-Money Valuation Calculator Download
The pre and post-money valuation calculator is available for download in Excel format by following the link below.
Users use this startup pre and post-money valuation calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a pre-money post-money valuation spreadsheet that you might use when preparing financial projections in Excel. It is purely illustrative of a pre-money post-money calculator. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the pre-money valuation calculator/post-money valuation calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.