When it comes to the valuation process, it has a major impact on ownership ratios. This is due to the fact that the amount of value levied on a business before investing varies greatly. For example, sometimes the pre-money valuation will be worth more than the post-money valuation since the pre-money valuation excludes the money spent.
When calculating the post-money evaluation, the investment amount plus the percent the investor receives equals the post money valuation. For example, if an investment is worth $4 million and the investor receives 10 percent, the post money evaluation would equal $40 million.
In order to calculate pre-money evaluation, it is important to remember that this valuation is before it receives any funding from investors. However, this type of valuation provides investors information on how the company would be valued currently.You must first calculate the post-money evaluation to get the pre-money evaluation. The formula is the post-money valuation minus the investment amount.