A tool used in financial modeling, particularly in venture capital and private equity, determines the value of a company before and after an investment. For instance, if a company is valued at $1 million before a $250,000 investment, its value afterward is $1.25 million. This valuation process is essential for understanding ownership stakes and equity dilution.
Accurate valuation is critical for both investors and company founders. It ensures fair deals, manages expectations, and provides a foundation for future growth strategies. Historically, these calculations were performed manually, but dedicated tools and software now streamline the process, increasing accuracy and efficiency. This readily available technology has democratized access to sophisticated financial modeling, benefiting businesses of all sizes.