Definition
Pre-money valuation is the value of a company immediately before a new equity financing. It is used with the investment amount to determine post-money valuation and implied ownership.
Formula
Post-money (simplified) = pre-money + investment
How to use it
- Use pre-money and new investment to estimate investor ownership (investment / post-money).
- Confirm whether option pool increases are included in the pre-money (option pool shuffle).
Common mistakes
- Mixing pre-money and post-money definitions across different documents or cap tables.
- Treating the ownership math as exact without modeling the option pool and convertibles.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Pre-money Valuation" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Use a calculator that references this term (e.g., Pre-money vs Post-money Valuation Calculator) to sanity-check assumptions.
- Read the related guide (e.g., Pre-money vs post-money valuation: formulas, ownership, and pitfalls) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- Pre-money vs Post-money Valuation Calculator: Convert between pre-money and post-money valuation and estimate investor ownership from a financing round size.
- Option Pool Shuffle Calculator: Estimate founder dilution impact when the option pool is increased to a target percent of post-money (simplified).
- Pro Rata Investment Calculator: Estimate how much you need to invest in a new round to maintain your ownership percentage (simplified).
- SAFE Conversion Calculator: Estimate how a SAFE converts in a priced round using a valuation cap and/or discount (simplified).
Guides
- Pre-money vs post-money valuation: formulas, ownership, and pitfalls: Learn pre-money vs post-money valuation, how investor ownership is estimated, and why the option pool shuffle changes effective dilution.
- Option pool shuffle: how it impacts founder dilution (with example): Understand the option pool shuffle, why it's negotiated, and how a post-money option pool target changes dilution for existing holders.
- Pro rata rights: what they mean and how to estimate your check size: A practical guide to pro rata rights: maintaining ownership, estimating dilution if you don't participate, and common allocation pitfalls.
- Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs: A practical hub for startup fundraising and valuation basics: pre/post-money, pro rata, option pool shuffle, SAFE/note conversion, and liquidation preference outcomes.