Start with the stake you are willing to sell.
A financing round can be described from either direction: a valuation and an investment determine ownership, or an investment and an ownership target imply a valuation. Neither calculation establishes what the market will actually pay.
Working backwards from an ownership budget helps make trade-offs explicit. Raising more capital for the same percentage requires a higher valuation; accepting a larger investor percentage lowers the implied valuation.
The formula, made clear.
- Investor ownership
- Enter the post-round percentage; 20% is 0.20 in the equation.
- Pre-money valuation
- Post-money valuation less the amount raised.
Put the numbers in context.
Raising $2M for 20% implies a $10M post-money valuation and an $8M pre-money valuation.
| Input | Example value |
|---|---|
| Capital to raise | $2,000,000.00 |
| Investor ownership target | 20% |
| Implied pre-money valuation | $8,000,000.00 |
What this calculation assumes
Primary equity only. The ownership target excludes any incremental dilution from options or converting securities.
What to consider next.
Use the implied valuation as a scenario to discuss, then compare the planned raise with runway and milestone needs.
How we approach financial models →