Market Capitalisation

The total market value of a company's outstanding shares, calculated by multiplying the current share price by the total number of shares in existence. For private companies, it is the equivalent valuation agreed in a funding round.

Market capitalisation is the most widely referenced measure of a company's size and investor confidence. For founders raising capital, understanding how market cap is derived helps them argue for or defend a specific valuation with investors.

A founder raises a seed round at a pre-money valuation of £2 million. After issuing 1,000,000 new shares at £0.20 each (raising £200,000), the post-money market capitalisation is £2.2 million, representing the total implied value of all shares outstanding.