A tool used to determine a company’s valuation before an investment is made. For example, if an investor contributes $100,000 for 10% equity, the valuation before the investment is calculated to be $900,000. This initial valuation is essential for both investors and company owners to understand the implications of the investment.
Understanding a company’s worth before external funding is critical for negotiations and informed decision-making. This valuation provides a clear baseline for equity distribution, potential returns, and future growth projections. Historically, determining this figure often relied on complex spreadsheets and manual calculations. Modern tools automate and simplify this process, promoting transparency and efficiency in investment discussions.