{"concept_id":"ALTSS-VC-027","slug":"pre-money-and-post-money-valuation","canonical_name":"Pre-Money and Post-Money Valuation","aliases":["pre vs post money"],"kind":"metric","authority":"industry","facets":["VAL"],"domains":["VENTURE"],"display_title":"Pre-Money and Post-Money Valuation","search_aliases":["pre-money vs post-money valuation","how to calculate post-money valuation","pre-money valuation formula","price per share from pre-money valuation","is post-money valuation fair value"],"one_sentence_definition":"Pre-money valuation is the value a financing round places on a company's existing fully diluted equity before the new money; post-money valuation adds the new investment and equals the round price per share times all shares afterward.","plain_english":"A round is negotiated as a pre-money valuation and an amount to raise. Dividing the pre-money valuation by the number of shares already outstanding (counted fully diluted) gives the price per share. The new investor's ownership equals its investment divided by the post-money valuation.","parent_concepts":["priced-round"],"child_concepts":[],"related_concepts":["dilution","option-pool","fully-diluted-shares","down-round","safe-simple-agreement-for-future-equity","price-of-recent-investment","option-pricing-method"],"comparison_concepts":[],"not_the_same_as":[{"slug":"enterprise-value","distinction":"Enterprise value adds net debt to equity value and values the whole business; pre- and post-money valuations price a company's equity in a financing round."},{"slug":"fair-value","distinction":"Fair value for reporting is the price of a specific security between market participants; a post-money valuation is the newest round price applied to all shares."},{"slug":"price-of-recent-investment","distinction":"The price of recent investment is a valuation technique that calibrates fair value to a recent round; post-money is the round's arithmetic, not a fair value conclusion."}],"formula_ids":["F-VC-027-core-identities"],"worked_examples":[{"title":"Illustrative $10m round at $40m pre-money","paragraphs":["A company with 8,000,000 fully diluted shares raises $10m at a $40m pre-money valuation. The price is **$5.00**, the company issues **2,000,000** shares, post-money is **$50m** and the investor owns **20%**."],"calc":{"fn":"priced_round","inputs":{"pre_money":40000000,"investment":10000000,"pre_money_fd_shares":8000000},"expected":{"price_per_share":5,"new_shares":2000000,"post_money":50000000,"investor_ownership":0.2},"tol":0.001}},{"title":"Same headline, larger pre-money share count","paragraphs":["The investor asks for a new 1,000,000-share option pool to be counted in the pre-money. Headline valuations are unchanged ($40m pre, $50m post) and the investor still owns 20%, but the price falls to **$4.44** and the investor receives **2,250,000** shares. The original holders now own 8,000,000 / 11,250,000 = **71.1%** instead of 80%."],"calc":{"fn":"priced_round","inputs":{"pre_money":40000000,"investment":10000000,"pre_money_fd_shares":9000000},"expected":{"price_per_share":4.444444,"new_shares":2250000,"post_money":50000000,"investor_ownership":0.2},"tol":0.001}}],"sections":[{"heading":"What the headline numbers do and do not say","paragraphs":["Pre-money and post-money valuations are pricing conventions for a single round, not measures of what each share is worth. The post-money valuation multiplies the price of the newest, most senior preferred stock by every share, including common and junior preferred that lack its [liquidation preference](/glossary/liquidation-preference) and other rights, so it tends to overstate the value of those junior classes and can overstate the value of the company's equity as a whole. Valuation guidance treats the price of a recent round as a calibration point, not automatically as fair value. Fair value for financial reporting is determined separately, usually by allocating equity value across share classes (see [option pricing method](/glossary/option-pricing-method)) and calibrating to the round price (see [price of recent investment](/glossary/price-of-recent-investment)).","Gornall and Strebulaev (NBER Working Paper 23895, 2017; later published in the Journal of Financial Economics) model this effect for 135 US unicorns. In the working paper, reported post-money valuations averaged 50% above fair value, 15 companies were more than 100% above, and 65 of the 135 would lose unicorn status after adjusting for investor protections."]},{"heading":"Price per share is the economic term","paragraphs":["Two rounds with the same headline pre-money can have different prices per share, as the second example shows, because the pre-money share count is defined differently. The share count can be enlarged by an [option pool](/glossary/option-pool) increase, by converting [SAFEs](/glossary/safe-simple-agreement-for-future-equity) and notes, or by warrants. For comparing rounds, and for deciding whether a round is a [down round](/glossary/down-round), the price per share is the right measure."]},{"heading":"Secondary sales and tranches","paragraphs":["Post-money equals pre-money plus investment only for newly issued (primary) shares. If part of a round buys existing shares from founders or early investors (a secondary component), that money does not enter the company and does not add to the post-money valuation, although it changes who owns what. Tranched rounds, in which investors commit to fund later instalments on milestones, are usually quoted at the full post-money but issue shares only as each tranche closes."]},{"heading":"Post-money in SAFEs","paragraphs":["The \"post-money valuation cap\" in a post-money SAFE uses its own definition: the capitalisation after all SAFEs convert but before the priced round's new money. It is therefore not the same number as the post-money valuation of the round in which the SAFE converts."]}],"classification_rules":[],"calculation_rules":[],"common_mistakes":["Comparing pre-money valuations without checking what each pre-money share count includes.","Treating post-money valuation as the value of every share class.","Adding secondary proceeds to the post-money valuation.","Using a SAFE's post-money cap as if it were the post-money valuation of the later priced round."],"edge_cases":[],"external_standard_mappings":[],"source_ids":["SRC-ACAD-GORNALL-STREBULAEV-2017","SRC-IPEV-2025","SRC-US-FASB-ASU-2011-04","SRC-YC-SAFE"],"citations":[{"source_id":"SRC-IPEV-2025","pinpoint":"Sec. I 3.10 Calibrating to the Price of a Recent Investment, p. 38","supports":"A recent round price is not automatically fair value, is used to calibrate valuation inputs, and is not applied automatically to other share classes","source":{"source_id":"SRC-IPEV-2025","title":"International Private Equity and Venture Capital Valuation Guidelines (2025 edition)","authors":"IPEV Board","publisher":"IPEV","document_type":"standard","url":"https://www.privateequityvaluation.com/Portals/0/Documents/Guidelines/2025%20IPEV%20Valuation%20Guidelines.pdf","year":2025,"publication_date":"Published 11 December 2025; in effect for quarterly reporting periods beginning on or after 1 April 2026; early adoption encouraged","jurisdiction":"intl","status":"Current; supersedes the December 2022 edition","last_verified":"2026-10-01"}},{"source_id":"SRC-US-FASB-ASU-2011-04","pinpoint":"ASC 820-10-35-2","supports":"Definition of fair value as an exit price between market participants","source":{"source_id":"SRC-US-FASB-ASU-2011-04","title":"ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs","publisher":"Financial Accounting Standards Board","document_type":"standard","url":"https://storage.fasb.org/ASU2011-04.pdf","publication_date":"May 2011","jurisdiction":"US","status":"in force (codified in ASC 820)","last_verified":"2026-10-01"}},{"source_id":"SRC-YC-SAFE","pinpoint":"Post-money SAFE definitions (Post-Money Valuation Cap, Company Capitalization)","supports":"Post-money cap measured after SAFE conversion but before the priced round's new money","source":{"source_id":"SRC-YC-SAFE","title":"Y Combinator SAFE (post-money) documents and SAFE User Guide","authors":"Y Combinator","publisher":"Y Combinator","document_type":"template","url":"https://www.ycombinator.com/documents","year":2018,"publication_date":"Post-money SAFE introduced 2018","jurisdiction":"US","status":"Current","last_verified":"2026-10-01"}},{"source_id":"SRC-ACAD-GORNALL-STREBULAEV-2017","pinpoint":"Abstract","supports":"Post-money valuations overstate fair value for unicorns with senior preferred terms","source":{"source_id":"SRC-ACAD-GORNALL-STREBULAEV-2017","title":"Squaring Venture Capital Valuations with Reality (NBER Working Paper 23895)","authors":"William Gornall; Ilya A. Strebulaev","publisher":"National Bureau of Economic Research","document_type":"paper","url":"https://www.nber.org/papers/w23895","year":2017,"publication_date":"NBER WP 23895, October 2017; published version in Journal of Financial Economics per the NBER page","jurisdiction":"intl","status":"published","last_verified":"2026-10-01"}}],"faq":[{"q":"How do you calculate post-money valuation?","a":"Add the new primary investment to the pre-money valuation, or multiply the round's price per share by the fully diluted shares after the round."},{"q":"Is post-money valuation the company's value?","a":"Not in a fair value sense. It applies the price of the newest preferred share to all shares, including classes with fewer rights."}],"seo":{},"first_published":null,"last_reviewed":"2026-10-01","last_modified":"2026-10-01","content_version":"2.0.0","url":"https://altss.com/glossary/pre-money-and-post-money-valuation","json_url":"https://altss.com/reference/concepts/pre-money-and-post-money-valuation.json","title":"Pre-Money and Post-Money Valuation","formulas":[{"formula_id":"F-VC-027-core-identities","concept_id":"ALTSS-VC-027","label":"Core identities","plain":"Post-money = pre-money + investment; price per share = pre-money / pre-money fully diluted shares; new shares = investment / price; new investor ownership = investment / post-money","latex":"V_{\\mathrm{post}}=V_{\\mathrm{pre}}+I,\\qquad p=\\frac{V_{\\mathrm{pre}}}{S_{\\mathrm{pre}}},\\qquad N=\\frac{I}{p},\\qquad o_{\\mathrm{new}}=\\frac{I}{V_{\\mathrm{post}}}","variables":[{"symbol":"V_pre","meaning":"agreed pre-money valuation"},{"symbol":"I","meaning":"new primary investment in the round"},{"symbol":"S_pre","meaning":"pre-money fully diluted shares as defined in the term sheet"},{"symbol":"p","meaning":"price per share of the new series"},{"symbol":"N","meaning":"new shares issued"},{"symbol":"o_new","meaning":"new investors' fully diluted ownership after the round"}],"convention_note":"S_pre is a negotiated definition. It usually includes outstanding common and preferred on an as-converted basis, granted options, the unallocated pool including any increase required by the investor, warrants, and shares issued on conversion of SAFEs and notes. Anything added to S_pre lowers the price without changing the headline valuation.","implementation":"priced_round"}],"sources":[{"source_id":"SRC-ACAD-GORNALL-STREBULAEV-2017","title":"Squaring Venture Capital Valuations with Reality (NBER Working Paper 23895)","authors":"William Gornall; Ilya A. Strebulaev","publisher":"National Bureau of Economic Research","document_type":"paper","url":"https://www.nber.org/papers/w23895","year":2017,"publication_date":"NBER WP 23895, October 2017; published version in Journal of Financial Economics per the NBER page","jurisdiction":"intl","status":"published","last_verified":"2026-10-01"},{"source_id":"SRC-IPEV-2025","title":"International Private Equity and Venture Capital Valuation Guidelines (2025 edition)","authors":"IPEV Board","publisher":"IPEV","document_type":"standard","url":"https://www.privateequityvaluation.com/Portals/0/Documents/Guidelines/2025%20IPEV%20Valuation%20Guidelines.pdf","year":2025,"publication_date":"Published 11 December 2025; in effect for quarterly reporting periods beginning on or after 1 April 2026; early adoption encouraged","jurisdiction":"intl","status":"Current; supersedes the December 2022 edition","last_verified":"2026-10-01"},{"source_id":"SRC-US-FASB-ASU-2011-04","title":"ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs","publisher":"Financial Accounting Standards Board","document_type":"standard","url":"https://storage.fasb.org/ASU2011-04.pdf","publication_date":"May 2011","jurisdiction":"US","status":"in force (codified in ASC 820)","last_verified":"2026-10-01"},{"source_id":"SRC-YC-SAFE","title":"Y Combinator SAFE (post-money) documents and SAFE User Guide","authors":"Y Combinator","publisher":"Y Combinator","document_type":"template","url":"https://www.ycombinator.com/documents","year":2018,"publication_date":"Post-money SAFE introduced 2018","jurisdiction":"US","status":"Current","last_verified":"2026-10-01"}]}