Pre / Post-Money Valuation

What a company is worth before vs after new investment goes in

What it is

Pre-money valuation is what a company is judged to be worth right before it takes in new investment; post-money is that value plus the new cash (post-money = pre-money + amount raised). The investor's ownership equals their investment divided by the post-money valuation. So a $2M investment at an $8M pre-money ($10M post) buys 20%.

Why it matters

The pre/post distinction decides exactly how much of the company investors get. Founders who quote "valuation" without specifying which one can accidentally give away far more than they intended.

Resources

Investopedia, Post-Money Valuation

investopedia.com

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