LIVE EVENT
GCN Investor Conference in Newport Beach, CA
MARCH 25 · NEWPORT BEACH, CA
LIVE EVENT
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Part of our fundraising series. For the full picture, from deciding whether to raise to closing the round, read How to Raise Capital for a Startup: The Complete Guide.
Pre-money valuation is the value of your company before new money is added.
Example:
The investor owns: $1M / $5M = 20%
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:
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:
Ask:
🔍 “Is that valuation pre- or post-money?”
📑 Get it in writing.
📊 Model both scenarios.
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.
For founders, that fixed percentage cuts both ways. The more SAFEs you raise before your priced round, the more of the dilution lands on you rather than on the earlier SAFE holders. Keep a running total of every SAFE you sign and what percentage it will convert into.
The headline valuation is only half of the story. What founders actually care about is how much of the company they still own after the round closes — and that depends on everything that gets added to the cap table at the same time as the new money.
Three things shrink a founder’s stake in a typical round:
A founder who only looks at the first item will consistently overestimate how much they keep.
Investors usually want an employee option pool in place before they invest, and they generally want it counted in the pre-money valuation. That means the pool dilutes existing shareholders, not the new investor.
For example, imagine an investor offers $2M at an $8M pre-money valuation, so the post-money is $10M and the investor owns 20%. The term sheet also asks for an unallocated option pool equal to 10% of the post-money company, created before the investment.
In effect, the founders’ share of the company was priced at $7M, not $8M. The extra $1M of value went into the pool. This is sometimes called the “option pool shuffle,” and it is one of the most common ways founders give up more than they expected. You can push back by sizing the pool to a realistic hiring plan rather than a round number.
Dilution is multiplied, not added. Each round takes a percentage of what is left.
For example, if two co-founders split a company 50/50 and then give up 30% in a seed round (investor plus pool), each owns 35%. If a Series A later takes another 25%, each founder’s stake falls to roughly 26%. Neither founder did anything wrong — but neither should be surprised. Modelling two or three future rounds before you sign the first one shows you what “good” terms actually need to look like.
Angel investors, VCs and family offices in one room for one day, with live pitches, exhibitor booths and an evening reception at the Renaissance Newport Beach.
See the event →
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