Startup valuations are implied, not derived: a company with no earnings and little revenue is worth what the round says it is, and the round says it in two numbers, the amount raised and the equity given for it. Startup company valuation is the arithmetic that turns those into a pre-money and a post-money and tells the founders what they keep, and the pre revenue startup valuation calculator is that arithmetic and nothing more, because there is nothing else to multiply. This page works it on the hub's example, $500,000 raised for 20%, says how to calculate startup valuation when the round has a note or a SAFE in front of it, and points at the free startup valuation tool on this site that does the sum from your own term sheet, with no account.
The startup valuation calculator: post-money, pre-money, what the founders keep
Post-money valuation equals the amount raised divided by the equity given. $500,000 for 20% is $500,000 divided by 0.20, a $2,500,000 post-money. Pre-money equals post-money less the amount raised, $2,000,000. The founders and earlier holders keep 100% less the equity given, 80%, and their 80% of a $2,500,000 company is $2,000,000, the pre-money by another route. The same round at 25% is a $2,000,000 post-money and a $1,500,000 pre-money with 75% kept; at 15%, $3,333,333 post and $2,833,333 pre with 85% kept. The startup company valuation calculator on this site works those from the two numbers on the term sheet.
How to calculate startup valuation when a note or a SAFE converts
A convertible note or a SAFE raised before the round converts into equity at the round, at a discount or a cap, and the equity it takes comes out of the same company, so the founders' share after the round is 100% less the new investor's percentage less the converting instruments' percentage. If a SAFE with a $2,000,000 cap converts at the hub's example round, it converts as if it had bought at a $2,000,000 pre-money, and the percentage it takes is its amount divided by that; the tool takes the converting instruments as inputs so the founders' number is the one after everything converts. The SEC's Regulation D pages, linked below, describe the exemption most such rounds are sold under.
The pre revenue startup valuation calculator: what it can and cannot say
A pre-revenue startup has no earnings to multiply, so the calculator can say what the round implies and cannot say whether the round is fair; that is the negotiation, and the founder's leverage in it is the alternatives, not the arithmetic. What the arithmetic does say is what each term costs: a 5-point difference in the equity given at $500,000 raised is the difference between a $2,500,000 and a $2,000,000 post-money, $500,000 of the founders' paper value. Knowing that lets a founder read a term sheet's percentage as dollars, which is the tool's whole job; the Small Business Administration's guide to funding a business, linked below, is the plain-language reference for the ways a round can be structured.
From one round to the next: the record
Each round revalues the company, and each dilutes the earlier holders by the equity given, so the useful record is the sequence: the pre-money and post-money at each round, the percentage each class holds after it, and what changed between them. The free startup valuation tool on this site works any one round with no account; the paid plan files each round's valuation against the company and the date, with the cap table's percentages after it, exported when an investor or the accountant asks. A founder who can show the sequence is a founder who does not re-derive it in a meeting.
Questions people ask about startup valuations
How is a startup valued?
By its round: post-money equals the amount raised divided by the equity given, pre-money equals post-money less the raise. $500,000 for 20% is a $2,500,000 post-money and a $2,000,000 pre-money, with the founders keeping 80%.
How do notes and SAFEs change the calculation?
They convert into equity at the round at their discount or cap, and that equity comes out of the same company, so the founders keep 100% less the new investor's share less the converted instruments' share. The tool takes them as inputs.
Can a pre-revenue startup valuation calculator say if a round is fair?
No. It says what the round implies and what each term costs in dollars; whether the round is fair is the negotiation, decided by the founder's alternatives.