I was talking with a friend of mine that sits on the board of an angel investor group. He told me that one of the first (and favorite) questions they like to ask presenters is what their “pre-money” valuation is.
Unless you’ve been down this road before, or have been coached, then you might be caught off-guard.
In this short video, which I filmed in my car, I give you the simple formula to calculate your pre-money valuation.
In a nutshell, you take the “Post-Money” valuation and subtract the amount of money you are raising.
Your Post-Money valuation is simply the amount of capital you are raising divided by the amount of equity you are offering.
So for example, if you are raising $500,000 and offering 33% of your company to do that, then:
- Post-Money Valuation is $500,000 ÷ .33 = $1,515,000 (rounded)
- Pre-Money Valuation then is $1,515,000 – $500,000 = $1,000,000 (rounded)