01 / UNDERSTAND THE CONCEPT
One valuation before the round. Another after.
Pre-money valuation describes the agreed equity value before new primary capital enters the business. Post-money valuation adds that new capital. The distinction matters whenever an investor describes a stake as a percentage of the company.
A headline valuation is not a cash balance or an exit guarantee. Share rights, outstanding convertibles and option pool changes can make the effective economics more complex than the headline number.
02 / THE MATHEMATICS
The formula, made clear.
Post-money valuation = pre-money valuation + new primary investment
- Pre-money
- Equity value immediately before the primary investment.
- Primary investment
- New cash paid to the company for newly issued shares.
03 / A WORKED EXAMPLE
Put the numbers in context.
An $8M pre-money valuation plus a $2M investment gives a $10M post-money valuation. The new investors hold 20%.
| Input | Example value |
|---|---|
| Pre-money valuation | $8,000,000.00 |
| New primary investment | $2,000,000.00 |
| Post-money valuation | $10,000,000.00 |
MODEL BOUNDARIES
What this calculation assumes
No secondary transactions or converting instruments. Share rights are treated as economically equivalent.
FROM UNDERSTANDING TO ACTION
What to consider next.
Use the post-money value to estimate dilution and the implied value of retained ownership.
How we approach financial models →