How to use the pre-money and post-money calculator
Pre-money is what the company is worth before the round; post-money is what it is worth once the money is in the bank. The relationship is simply post-money = pre-money + new investment, and the new investor's ownership is the investment divided by the post-money figure.
Pick the basis you are negotiating on. Enter a pre-money number and the tool adds the round to get post-money; enter a post-money number and it subtracts the round to back into pre-money. Mixing the two bases is the most common way founders miscalculate a cap table, so every result line states which figure it came from.
Add the share count outstanding before the round and the tool also prices the round: price per share is the pre-money valuation divided by those shares, and new shares are the investment divided by that price with the fraction dropped. Leave it blank and those lines stay hidden. Real term sheets often price off a fully diluted count including the option pool.
Frequently asked questions
Once the check clears, the company is worth the post-money figure, and the investor owns a share of that whole. Dividing by the pre-money valuation overstates the stake. On a $5,000,000 pre-money with a $1,000,000 round, the investor owns $1,000,000 divided by $6,000,000, about 16.67%, not 20%.
Term sheets use both, but mixing them changes the ownership split entirely. A $5,000,000 pre-money and a $5,000,000 post-money leave founders with very different percentages, so state clearly in writing which basis a quoted number uses.
It is usually the pre-money valuation divided by the shares outstanding just before the round. This tool uses that method and rounds the price to the nearest cent, then divides the investment by that price and drops the fraction to get new shares. Real deals often price off a fully diluted count that includes the option pool.