Pre-money / post-money.
aka pre-money valuation, post-money valuation, pre and post
What the company is worth before the cheque, and after it lands.
What it actually means
Pre-money valuation is what investors agree a company is worth before their new investment goes in. Post-money is that number plus the money invested. The investor’s ownership is simply the investment divided by the post-money.
The formula is the whole concept: post-money = pre-money + new money. Agree a $12 million pre-money and invest $3 million, and the post-money is $15 million. The investor owns 3 ÷ 15 = 20%.
Why two numbers? Because negotiating the pre-money is negotiating the price, and the post-money is what everyone quotes afterwards. Headlines say “valued at $15 million”; that is the post. The founder’s share is calculated on it. The small print matters: a $15M post-money with a $3M round and a $15M pre-money with a $3M round are very different deals, and people “accidentally” mix them up in negotiations all the time.
Where you'll hear it
They’re saying $20M post. With their $5M in, that is only $15M pre, not the $20M pre we discussed. That is 25% not 20%.
Translation: same headline number, five points of ownership difference. Read the term sheet twice.
Every funding announcement, every term sheet and every conversation with a lawyer uses both. Employees hear it when someone says “the last round was at $40M post”, which is how they work out what their options might be worth.
The pop-culture version
Before the deal, the club is worth $100 million: the stadium, the squad, the fans. That is pre-money. The new owner does not buy existing shares; they put $25 million of fresh cash into the club to build a training ground.
After the deal the club has everything it had plus $25 million in the bank, so it is worth $125 million. That is post-money. The new owner put in 25 of 125, so they own 20%. The old owners still own the same stadium and squad; they just own 80% of a club that also has a new training ground.
The whole negotiation is about one number: was the club really worth $100M before the money, or $80M?
If the founders convince investors the pre-money is higher, they give up less of the company for the same cash. If investors push it lower, they get more. Everything else in the term sheet is detail around that single argument.
Say it like you mean it
“We raised $3M at a $12M pre, so $15M post and the new investor holds 20%.”
All three numbers, in order. Nobody has to ask a follow-up.“We raised at a $15M valuation.”
Pre or post? The answer changes the ownership by several points. Always say which.One more trap: an option pool created before the round is usually counted in the pre-money, which lowers the founders’ real price. If an investor insists on a “10% post-money pool” from the pre-money, the founders are paying for it. Ask your lawyer to show the maths both ways.
How the pre-money number actually gets set: comparables, scorecards, VC method and what moves it at each stage.
Decoded next
Decoded by the Kurums editorial team. Kurums Decoded translates the language of business for people who are new to it. Definitions are kept short on purpose; the serious version above goes deep. Nothing here is financial, legal or career advice.
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