Also known as Pre vs post valuation
Pre-money is a startup's valuation before new investment; post-money is that value plus the new cash raised.
Key takeaways
Pre-money is a startup's valuation before new investment; post-money is that value plus the new cash raised. The distinction matters because ownership percentages are calculated on the post-money figure. Confusing the two changes how much of your company investors actually get.
Formula
Post-money = Pre-money + Investment; Ownership % = Investment ÷ Post-money
You raise $2M on an $8M pre-money valuation. Post-money = $8M + $2M = $10M. The investor's ownership = $2M ÷ $10M = 20%. If you'd quoted $8M post-money instead, they'd own 25% for the same check.
| Pre-money | Post-money | |
|---|---|---|
| Definition | Value before the new investment | Pre-money plus new cash raised |
| Formula | Agreed valuation | Pre-money + investment |
| Ownership based on | N/A | Investment ÷ post-money |
| $8M value, $2M raise | $8M | $10M → investor owns 20% |
Founders routinely quote a number without saying pre or post, and the gap is real dilution. On a $2M raise, the difference between $8M pre and $8M post is 5 points of your company, worth getting precise before you sign a term sheet.