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Pre-money vs post-money valuation: dilution, ownership, and option pool math

Learn how pre-money vs post-money valuation affects investor ownership, founder dilution, and the option pool shuffle before a round closes.

Written by MetricKit EditorialReviewed by MetricKit Editorial ReviewUpdated 2026-01-28
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Best for

Founders and investors negotiating round ownership, dilution, and option-pool mechanics.

Decision

How investment size, valuation framing, and option-pool setup change effective ownership after the round.

Use it when

You need to sanity-check dilution before a term-sheet discussion or board conversation.

Reviewed by

MetricKit editorial review for startup fundraising mechanics.

Reviewed to keep pre/post-money definitions and dilution math aligned with SAFE, note, and liquidation-preference content.

Try it in a calculator

Pre-money vs Post-money Valuation Calculator
Example: $20M pre-money + $5M investment
Opens the calculator with this scenario

Definitions

  • Pre-money valuation: the company value before new investment.
  • Post-money valuation: the company value after new investment (often pre-money + investment, simplified).
  • Ownership: the percent of the company after the round on a fully diluted basis (the basis matters).

Core formulas (simplified)

  • Post-money = pre-money + investment.
  • Implied investor ownership ~ investment / post-money.
  • Existing holders' combined ownership ~ pre-money / post-money.

Why founders get surprised (option pool shuffle)

Many term sheets require increasing the option pool before the investment and counting the pool in the pre-money. This shifts dilution onto existing holders (founders and prior investors). The headline valuation can look the same while founder ownership drops more than expected.

Common mistakes

  • Using ownership on an issued-shares basis instead of fully diluted.
  • Ignoring SAFEs/notes converting in the priced round (dilution stacks).
  • Treating investment / post-money as exact without building a cap table.

FAQ

Is post-money always pre-money + investment-
Often as a simplified framing, yes. But term details like option pool increases, convertible instruments, and fees can change effective ownership outcomes.

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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.
SAFE conversion guide: cap vs discount and dilution
How SAFE conversion works in a priced round, when the cap or discount wins, and how pre- vs post-money terms change dilution.
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