Pre-Money vs Post-Money Valuation

Pre-money and post-money are not interchangeable. Mixing them up costs founders ownership.

Definitions

• Pre-money valuation: the value of the company before the investment.
• Post-money valuation: pre-money + investment amount.

Worked example

You raise $1M at a $5M pre-money valuation. The post-money is $6M, and investors take 16.67% ($1M / $6M). If you accidentally treat the $5M as post-money, the investors instead take 20% — a 3.33-point ownership difference for the same dollar amount.