Post-Money Valuation

A company's agreed value immediately after a financing round's new money has been added, equal to the total resulting share count multiplied by the round's price per share.

Example

10,000,000 total shares at 2.00 a share gives a 20,000,000 post-money valuation.

Important

A round's post-money valuation is a negotiated price for the newest, most protected slice of the cap table, not an appraisal of what the whole company would sell for.

Related terms

• Pre-Money Valuation — A company's agreed value immediately before a financing round's new money is added.
• Liquidation Preference — A contractual right for preferred shareholders to receive a stated multiple of their investment back before common shareholders receive anything, in a sale or wind-down.
• Cap Table — The running ledger of who owns what percentage of a company, on what instrument and what terms, before and after each financing event.

Lessons that explain it

• The option pool shuffle quietly lowers the founders' real price — Post-money equals pre-money plus the new investment. But when investors require an option pool to be created inside the pre-money valuation, the existing shareholders bear its full cost. (13 min)
• A smaller slice of a much bigger company is usually the good outcome — Each funding round reduces existing holders' percentage. Dilution is not a loss in itself; it becomes one when the company's value does not rise enough to compensate, as in a down round. (12 min)
• Model the rounds between now and the exit, or your ownership estimate is fiction — Today's percentage is not what you will hold at an exit. Projecting future rounds and pool top-ups gives a realistic ownership figure and a much better sense of what an outcome would return. (12 min)
• A pro-rata right is an option to keep your share, and options are worth more on the right companies — Pro-rata rights let you invest enough in later rounds to maintain your ownership. They are valuable mainly in companies that are doing well, where access is hard to get, and costly in companies that are not. (12 min)
• A SAFE is a promise of future shares, and post-money SAFEs stack on the founders — A SAFE gives an investor the right to shares at a future priced round, usually at a valuation cap. With post-money SAFEs, each additional SAFE dilutes the founders rather than earlier SAFE holders. (12 min)
• The VC method works backwards from the exit — The venture capital method starts from a plausible exit value, divides by the return an investor needs, and adjusts for future dilution to reach what the company can be worth today. (11 min)

All 578 terms in the Investing glossary