What Is Pre-Money Valuation?

Pre-money valuation is the value of your company before new money is added.

Example:

• Pre-money: $4M
• Investment: $1M
• Post-money: $4M + $1M = $5M

The investor owns:
$1M / $5M = 20%

What Is Post-Money Valuation?

Post-money valuation is your company's value after the investment.

If someone says “I’ll invest $1M at a $5M post-money valuation,” that implies:

• Pre-money: $4M
• Investor equity: $1M / $5M = 20%

Why the Difference Matters

Because miscommunication can cost you equity.

If you think the valuation is pre-money, but the investor meant post-money, you might give away more equity than intended.

Example:

• You agree to a $5M valuation.
• You thought it was pre-money (so post-money = $6M).
• Investor meant post-money (so pre-money = $4M).
• You gave away 20%, not 16.6%.

Founders: Always Clarify!

Ask:
🔍 “Is that valuation pre- or post-money?”
📑 Get it in writing.
📊 Model both scenarios.

Convertible Instruments and Valuation

SAFEs and convertible notes often don’t have a valuation yet — but they convert based on a cap or discount that affects pre/post-money math later.

Y Combinator now uses Post-Money SAFEs so dilution is easier to track.

🧠 Tip: A post-money SAFE gives investors a fixed percentage of ownership upon conversion.