Define the round before choosing a valuation
Start with the amount sought, the use of funds and the milestones that investment is intended to support. Explain the existing ownership structure and whether new shares, outstanding instruments or an option pool will affect the round.
The analysis should address a defined transaction or decision. A target ownership percentage can help describe what you want to propose, but does not establish that the price is appropriate. A valuation brief turns the ambition into questions that can be examined.
This page focuses on pricing a round. For a business still building its first evidence of demand, our early-stage startup valuation service explains the preparation that comes first.
Pre-money, post-money and dilution: a worked example
| Item | Illustrative amount |
|---|---|
| Pre-money equity value | £3,000,000 |
| New cash investment | £750,000 |
| Post-money equity value | £3,750,000 |
| New investor ownership | 20% |
| Existing owners collectively retain | 80% |
This hypothetical example excludes option-pool changes, converting instruments, fees and differing share rights. It illustrates the arithmetic, not a recommended price or expected deal.
Ask whether every ownership percentage is measured on the same basis. “Fully diluted” needs an agreed definition of which shares and potential shares are included.
Prepare evidence that supports the fundraising valuation
Trading and traction
Explain where revenue comes from and how much is repeatable or contracted. For a young business, separate achieved milestones from the next targets.
The financial plan
Connect revenue assumptions to pricing, acquisition, capacity and costs. Show the funding needed to deliver the plan and how results change if progress is slower.
Valuation evidence
Assess relevant transactions, business characteristics and valuation approaches. Record the limits of comparisons rather than selecting the highest headline figure.
The most appropriate method depends on stage, purpose and available information. There is no standard multiple that makes every funding proposal defensible.
Share rights and option pools can change the comparison
Two proposals can state the same headline valuation and still have different ownership consequences. Existing convertible instruments, additional shares or changes to an option pool can affect the calculation.
The valuation scope should identify the relevant instruments and assumptions. Your legal advisers need to explain the rights in the actual documents. A simplified cap table should not be treated as a substitute for that review.
Where EIS or SEIS is involved, keep the scheme assessment separate from commercial pricing. See EIS and SEIS valuation support for that distinction.
What to agree in a fundraising valuation engagement
- The valuation purpose, date and ownership interest.
- The financial information and assumptions to be reviewed.
- The methods and level of sensitivity analysis appropriate to the assignment.
- The agreed written output and intended users.
- Whether dilution scenarios or additional modelling are included.
- The discussion of findings and any follow-up questions covered by the fee.
A well-defined output gives management something specific to review with advisers and potential investors. It does not remove the uncertainty of a funding negotiation or guarantee investment.
Start with the funding decision you are facing
You can enquire while preparing a round or while considering indicative terms. Tell us which information is available and which assumptions remain open. Any deadline should be raised at the start.
Scope and fees are agreed before work begins. The initial form does not require financial documents or payment. Investor introductions, legal drafting and finance arrangement are not included unless separately agreed and available.
Your questions, answered.
Can you help decide a pre-money valuation?
We can scope an assessment of value and the supporting assumptions for your funding discussion. A target funding amount alone does not determine the appropriate pre-money value.
Will the report guarantee the valuation investors accept?
No. The final price and terms are negotiated and depend on investor circumstances as well as the assessment.
Can you model dilution from an option pool or convertible instrument?
This can be discussed as part of the scope when the relevant terms and information are available. Legal interpretation and the actual transaction documents remain separate responsibilities.
Is fundraising valuation only for startups?
No. Established SMEs raising equity can also need valuation support. The method and evidence should reflect their stage and business model.