GlossaryDeals

What is pre-money and post-money?

Pre-money valuation is what a company is worth before new investment, and post-money valuation is that figure plus the new money.

In practice

An investor’s stake is the amount invested divided by the post-money valuation. Headline valuations in the press do not always say which one they mean. Option pools add a further wrinkle, because creating or enlarging one before the round reduces the existing holders’ share rather than the new investor’s.

An example

Round numbers, not a real fund

Say an investor puts $2 million into a startup. At $10 million pre-money it owns about 16.7%; at $10 million post-money it owns 20%.

Why it matters

The difference decides how much of the company the new investor owns, so the same headline number can mean two different deals.

SAFEA SAFE, or simple agreement for future equity, lets an investor give a startup money today in return for the right to receive shares in a later funding round.
Liquidation preferenceA liquidation preference gives certain investors, usually holders of preferred shares, the right to get their money back ahead of common shareholders when a company is sold or wound up.
Down roundA down round is a funding round for a startup at a lower valuation than its previous round.
Fair valueFair value is what an asset would fetch in an orderly sale between willing buyers and sellers on the measurement day. Accounting standards require funds to report it.

The terms, in the news each morning.

FundOps Daily carries the day’s fund closes, deals and moves across private markets. Free, seven days a week.

Get it free

What is pre-money and post-money?

In practice

An example

Why it matters

Video

In the news