Post-Money Valuation

It's easy to calculate the value of public companies, more or less. So many shares outstanding...times the price per share at which the stock is trading. Easy.

But what about private companies, where there are no numbers publicly available? And then what about private companies that are bare-naked start-ups without even revenues, let alone an earnings number against which to take a multiple?

Yeah, you don't know. You just...guess.

So...a given company has, say, a totally-guessed-at startup value of $8 million (two PhDs from Stanford, a half dozen other engineers, a cool idea). Then venture capitalists invest $3 million. So now...who owns what? Well, the denominator is 11 and the numerator is 3 if you're the VC, and 8 if you're the founder group. That $8 million is the pre-money valuation; the $11 million is the post-money valuation.