However, in actual, real-life scenarios, the calculation of post-money valuation can be more complicated—because the capital structure of companies often includes convertible loans, warrants, and option-based management incentive schemes.
In this scenario, the pre-money valuation should be calculated as the post-money valuation minus the total money coming into the company—not only from the purchase of shares, but also from the conversion of loans, the nominal interest, and the money paid to exercise in-the-money options and warrants.
[2] The post-money valuation formula does not take into account the special features of preferred stock.
[4] The debate centers on whether company valuation or price per share should be used to classify the round.
[4] Consistent with that assessment, in a survey of attorneys based in Silicon Valley, eight out of ten said that share price should be used to classify the round.
[4] That said, two other lawyers in the same survey claimed that valuation and share price should both be used together to classify the round.
In contrast, some investors and companies have argued that valuation alone, and not share price, should be used to classify the round.
Companies that are successfully growing will often raise equity in a series of subsequent up rounds from institutional investors.