What Is Startup Valuation?Startup valuation refers to the estimated worth of a startup at a specific point in time. Early-stage startups are often valued based on:Market size and opportunityFounding team strengthProduct development stageUser traction and revenueComparable deals and industry trendsValuation isn’t just a number — it determines how much equity you give up when raising capital.Pre-Money vs. Post-Money Valuation🔹 Pre-Money Valuation:The company’s valuation before new investment is added.🔹 Post-Money Valuation:The company’s valuation after the new investment is included.Formula:Post-Money Valuation = Pre-Money Valuation + Investment AmountExample:Let’s say:Pre-Money Valuation: $4 millionInvestment Amount: $1 millionThen:Post-Money Valuation = $4M + $1M = $5 millionInvestor Ownership = $1M / $5M = 20%So the new investor gets 20% of the company, and the founders + existing shareholders are diluted accordingly.Why It MattersDilution: Founders often underestimate how much equity they’re giving away.SAFE/Note Conversions: SAFEs typically convert based on post-money terms, affecting ownership.Cap Table Planning: Pre- and post-money directly shape how shares are divided.Valuation and Ownership TableInvestment Pre-Money Post-Money Investor % Founder %$500K $2M $2.5M 20% 80%$1M $4M $5M 20% 80%$1.5M $6M $7.5M 20% 80%Factors That Influence ValuationRevenue and profit marginsUser growth and engagementMarket trends and demandCompetition and barriers to entryStage of product (MVP, beta, scaling)Founder reputation and track recordTools to Model Valuation and DilutionCarta – Cap table managementPulley – Modeling dilution scenariosEquitySim – Early-stage simulationsAngelCalc – Valuation and SAFE calculatorCommon Mistakes❌ Confusing pre- and post-money when negotiating❌ Not modeling dilution across multiple rounds❌ Overvaluing too early (makes future rounds harder)❌ Underestimating impact of SAFEs and convertible notes