A reader asks: I’m the founder of a mobile apps startup, and we’re starting to get some incredible traction. I’ve been bootstrapping the venture for the last year, but I’d really like to raise about $2 million to scale this thing. If a VC invests $2 million, what percentage of the company will he own?
Answer: It depends upon the value of your company prior to the investment (commonly referred to as the “pre-money valuation” or “pre”). The VC’s percentage ownership is calculated by dividing the amount of its investment by the post-money valuation of the company (which is equal to the pre plus the amount of the investment).
For example, if the pre were $4 million, the VC would get one-third ($2,000,000 divided by $6,000,000); on the other hand, if the pre were $1 million, the VC would get two-thirds ($2,000,000 divided by $3,000,000).
To read the full, original article click on this link: Here’s the best way to value your startup | VentureBeat
Author: Scott Edward Walker
