When an investor proposes a valuation, the single most important question is: pre-money or post-money? The two differ by exactly the size of the round — and that difference lands squarely on your ownership.
- Pre-money valuation — what the company is worth before the new investment.
- Post-money valuation — what it’s worth after, i.e. the pre-money plus the amount raised.
The math
The relationship is simple:
- Post-money = pre-money + amount raised
- Investor’s ownership = amount raised ÷ post-money valuation
Because the investor’s percentage is calculated against the post-money number, agreeing on a valuation without specifying which one can swing your dilution by several points.
A worked example
Say you raise $4M. If the $16M is pre-money, then post-money is $20M, and the investor owns $4M ÷ $20M = 20%. But if that $16M is post-money, the investor owns $4M ÷ $16M = 25% — and your pre-money was really only $12M. Same headline number, five points of difference in who owns your company.
The option pool shuffle
There’s a second subtlety investors often build in: expanding the option pool as part of the round. If the new pool is created pre-money, its dilution comes out of the existing shareholders — mostly the founders — rather than being shared with the new investor. It’s a standard ask, but it effectively lowers your true pre-money valuation, so it’s worth modeling explicitly.
Why it matters
“Valuation” is never just one number — it’s a number plus a definition plus a pool assumption. The cleanest way to negotiate is to model the full round against your live cap table and watch your post-round ownership move as you change the terms. That turns an abstract debate about valuation into a concrete answer about your stake. You can do exactly that in scenario modeling.