Valuation

Valuation is the technical process of estimating the market value of a startup. Unlike established companies, the valuation of early-stage startups is not based solely on past profits, but rather on future growth potential, market size, team quality, and current traction. There are two fundamental concepts: Pre-money Valuation (company value before receiving the new investment) and Post-money Valuation (company value immediately after the money comes in). The Post-money calculation is the sum of the Pre-money and the invested amount. The valuation defines the price per share and, consequently, the percentage of dilution that the founders will suffer by accepting external capital.

Practical Example: Uma startup e um fundo de investimento concordam com um Pre-money Valuation de R$ 8 milhões. O fundo decide investir R$ 2 milhões. O Post-money Valuation da startup passa a ser de R$ 10 milhões (8 + 2). Para calcular a participação do investidor, divide-se o aporte pelo valor final: R$ 2 milhões / R$ 10 milhões = 20%. Portanto, o investidor adquiriu 20% da empresa pelo valor aportado.

Read the book Venture Deals, by Brad Feld and Jason Mendelson.