Pre-money or post-money? The arithmetic behind your ownership.
Two numbers describe the same company, one before the new money arrives and one after. Mixing them up is the fastest way to give away more than you meant to.
The short answer
Pre-money is what the company is worth before the new investment. Post-money is pre-money plus the new cash. The new investors own their check divided by the post-money. Always ask which one a number refers to.
Example: $2M raised at an $8M pre-money, $10M post-money
80% you and your existing holders keep
Arithmetic from the example only. $2M divided by $10M post-money is 20%. Use the calculator for your own numbers.
- Founders and existing: 80%
- New investors: 20%
Compare the options
Measured
Pre-money: Before the new money
Post-money: After the new money
Formula
Pre-money: Post-money minus new cash
Post-money: Pre-money plus new cash
Investor stake
Pre-money: Not read directly
Post-money: Check divided by post-money
Price per share
Pre-money: Pre-money divided by fully diluted shares
Post-money: Same price, more shares
Used on SAFEs
Pre-money: Older pre-money SAFEs
Post-money: Today's post-money SAFE
The one formula
Post-money equals pre-money plus the new cash. If an investor puts in $2M at an $8M pre-money, the post-money is $10M and they own 20%. If the same $2M came in at a $10M post-money, the pre-money would be $8M. The words matter because "a $10M valuation" can mean either.
The price per share comes from the pre-money divided by your fully diluted shares before the round. Fully diluted usually includes granted options and the unallocated option pool, which is why the pool size changes your real price.
How SAFEs use the same words
A post-money SAFE cap measures the company after all SAFE money but before the priced round. That makes each SAFE holder's stake easy to read: check divided by cap. The trade-off is that founders absorb the dilution from every SAFE you add. Older pre-money SAFEs shared that dilution with the investors instead.
Questions to ask when you get a number
- Is this valuation pre-money or post-money?
- Does the pre-money include a new or larger option pool?
- How do outstanding SAFEs or notes convert into this round?
- What percentage will founders hold after closing?
Terms to know
Pre-money valuation
The company's value before the new investment.
Post-money valuation
Pre-money plus the new cash raised in the round.
Fully diluted
All shares as if every option, warrant and convertible had turned into stock.
Does your deck support the valuation you're quoting?
Investors test any valuation against traction, team and market size. Upload your deck and we show you where the story is thin.
Questions founders ask
Which number do investors quote?
Either. Many priced-round term sheets state the pre-money, while SAFEs usually state a post-money cap. Confirm in writing which one you are agreeing to.
Does a higher valuation always help me?
It lowers dilution now, but a valuation your next round cannot beat can lead to a flat or down round. Pick a number your progress can grow into.
Sources
Sources: YC post-money SAFE user guide; standard venture financing practice. Not legal or financial advice.
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