Post-money valuation
pohst-MUH-nee val-yoo-AY-shun
The value of a company immediately after receiving investment, calculated as pre-money valuation plus the investment amount.
Post-money valuation is the value of your company after the investment is made. It equals pre-money valuation plus the amount invested. If the pre-money is $20M and the investment is $5M, the post-money is $25M.
Post-money valuation is the simplest way to calculate investor ownership: divide the investment by the post-money. A $5M investment in a $25M post-money company gives the investor exactly 20%.
SAFE notes increasingly use post-money valuation caps, which makes the math cleaner. A SAFE with a $10M post-money cap and a $1M investment converts to 10% ownership regardless of the pre-money valuation. This is reflected on the cap table.
Examples
An investor calculates their ownership.
Investment: $8M. Post-money valuation: $40M. Ownership: $8M / $40M = 20%. Simple. This is why many investors prefer to discuss post-money valuation rather than pre-money.
Multiple investors in the same round.
Post-money valuation is $30M. Investor A puts in $5M (16.7%). Investor B puts in $3M (10%). The round totals $8M. Pre-money is $22M. The investors collectively own 26.7%.
A SAFE note uses a post-money valuation cap.
An angel invests $500K on a SAFE with a $5M post-money cap. When the SAFE converts at the next priced round, the angel owns exactly 10% ($500K / $5M), regardless of what the priced round valuation turns out to be (assuming it is above the cap).
Frequently asked questions
Why do SAFEs use post-money valuation caps?
Because it makes ownership calculation simple. An investor knows exactly what percentage they will own at conversion: their investment divided by the cap. With pre-money caps, the percentage depends on how much total money is raised, which creates uncertainty.
Can post-money valuation decrease?
Between rounds, the post-money valuation from the last round is not updated. The next round sets a new valuation. If the new round's pre-money is lower than the previous round's post-money, that is a down round.
Related terms
The value of a company before receiving investment in a funding round.
The estimated worth of a company, determined during a funding round by negotiation between founders and investors.
A simple investment instrument created by Y Combinator that converts to equity at the next priced funding round.
The reduction in ownership percentage that existing shareholders experience when new shares are issued in a funding round.
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