How to use the pre-money and post-money calculator
- Choose what you know. Most term sheets give the investment and the pre-money valuation. If an investor asks for a percentage of the company, choose the ownership option; if you only know the post-money, choose that.
- Enter the investment and the second number for your mode.
- Enter the fully diluted shares before the round: all common and preferred shares, granted options and warrants, and any unallocated pool. Your cap table or the company’s lawyer has this figure.
- Enter any unallocated pool already in place and the pool investors want available after the round, as a share of post-money shares. Enter 0 for no pool requirement.
The formulas
Investor ownership = Investment ÷ Post-money
Pre-money = Investment ÷ Ownership − InvestmentAll valuations are on a fully diluted basis.
With an option pool created before the round, the price per share has to leave room for the new pool shares inside the pre-money:
Effective pre-money = Price per share × Shares beforePool % is the available pool required after the round, as a share of post-money fully diluted shares. With no pool requirement, the price is simply Pre-money ÷ Shares before.
A worked example
A startup with 10,000,000 shares fully diluted shares raises $2,000,000 at a $8,000,000 pre-money valuation. The post-money valuation is $10,000,000, and the investors own 20.0%.
The investors also require a 10% option pool after the round, created before their money goes in. That needs 1,428,571 new shares, which lowers the price per share to $0.7000 from the $0.8000 the headline pre-money suggests.
The new pool is worth $1,000,000, so the effective pre-money is $7,000,000. The founders end the round with 70.0%.
The option pool shuffle in numbers
The pool requirement is often as important as the valuation itself. Here is the same $8,000,000 pre-money round with different pool requirements:
| Pool required after the round | Price per share | Effective pre-money | Founders after |
|---|---|---|---|
| None | $0.8000 | $8,000,000 | 80.0% |
| 10% (example) | $0.7000 | $7,000,000 | 70.0% |
| 20% | $0.6000 | $6,000,000 | 60.0% |
The investors own 20.0% in every row. Only the founders’ share moves. If the same pool were added after the round instead, investors would share the dilution and the founders would keep 72.0% rather than 70.0%.
Neither approach is wrong: an option pool is a real cost of hiring, and investors argue that the team they are backing should pay for it. But founders comparing two term sheets should compare effective pre-money valuations, not headline ones. A higher headline offer with a large pool can be worth less than a lower one with a small pool. Sizing the pool to an actual hiring plan, rather than a round number, keeps the cost honest.
Working backwards
The other two modes answer different questions. If an investor offers $3,000,000 for 25% of the company, the implied post-money valuation is $12,000,000 and the pre-money is $9,000,000. If you are told the post-money is $15,000,000 after a $3,000,000 raise, the pre-money is $12,000,000 and the investors own 20.0%.
The pre-money is what the founders’ existing shares are being valued at, so it is the number to negotiate. The post-money mostly sets the starting point for the next round.
What this calculator does not include
- SAFEs and convertible notes. They convert into shares in the priced round and dilute the founders further. With a post-money SAFE the holder’s percentage is set before the new round’s money comes in; with a pre-money SAFE or a note it depends on the cap, the discount and the round itself.
- Liquidation preferences and other terms, which decide who gets paid first in a sale and can matter more than the valuation.
- Multiple rounds. For a cap table across seed, Series A and later rounds, use the equity dilution calculator.
- Fractional shares. Real share counts are rounded, which moves the price by a fraction of a cent.