Pre-Money vs Post-Money Valuation: How to Calculate It

The formulas

• Post-money = pre-money + new investment
• Investor stake = new investment ÷ post-money
• Pre-money = post-money − new investment
• Each existing shareholder's new stake = old stake × (pre-money ÷ post-money)

Worked example in OMR

Illustrative example: a startup agrees a pre-money valuation of OMR 800,000 and raises OMR 200,000.

• Post-money: OMR 800,000 + OMR 200,000 = OMR 1,000,000
• Investor stake: 200,000 ÷ 1,000,000 = 20%
• Founders who owned 100% now own 80%
• If the founders owned 90% and an angel 10%, they now own 72% and 8%

Why pre or post changes your stake

"We raised OMR 200,000 at a one million valuation" means two different deals. If one million is the post-money value, the investor owns 20%. If it is the pre-money value, post-money is OMR 1,200,000 and the investor owns about 16.7%. Always confirm which one the term sheet uses.

How early-stage valuations are set

• Comparables: what similar startups raised at, in a similar market and stage
• Scorecard method: adjusts a regional average for team, market, product and traction
• Berkus method: puts a value on key risk milestones, such as a working product or first sales
• VC method: expected exit value divided by the investor's target return, worked back to today
• Discounted cash flow: more useful at later stages, when cash flows can be forecast with confidence

At early stage, valuation is a negotiation backed by evidence. Better numbers give you a stronger position.

What else moves your ownership

• Option pool: if a new employee option pool is created before the round, it usually dilutes existing shareholders, not the new investor
• SAFEs and convertible notes: they convert at the round and add to dilution
• Price per share: post-money divided by fully diluted shares

Model every instrument in the cap table before you sign.

Frequently asked questions