Post-money valuation

Pre-money plus the new money. The value of the company immediately after the round closes.

Example

$4M pre + $1M raised = $5M post. The investor owns $1M ÷ $5M = 20%.

Important

Investor ownership is always calculated on POST-money. This is the single most common source of confusion in a first round.

Related terms

  • Pre-money valuation — What the company is agreed to be worth immediately BEFORE the new investment lands.
  • Valuation — The agreed price of the whole company, used to work out what percentage an investment buys.
  • Dilution — When new shares are issued, existing shareholders own a smaller percentage of the company than before.
  • Cap table — The record of who owns what part of the company — founders, employees, option pool and investors.

Lessons that explain it

  • Valuation, pre-money and post-money — The most confused pair of words in fundraising, and the arithmetic that decides what you own afterwards. (12 min)
  • Dilution — what you actually give up — Owning less of more can be better than owning all of little. But only if you know which one is happening. (12 min)

All 176 terms in the Founder glossary