Price & valuation
Pre-money vs post-money
Pre-money is what the company is agreed to be worth before the new investment lands; post-money is that figure plus the money raised — and your ownership is always calculated on the post-money number.
In plain English
The distinction is arithmetic, not philosophy. Pre-money plus the amount raised equals post-money. A company raising $2m at an $8m pre-money valuation has a $10m post-money valuation, and an investor who put in the full $2m owns 20% — because $2m divided by $10m is 20%, not the 25% that dividing by the pre-money number would suggest.
The reason this trips people up is that founders quote pre-money and investors think in post-money ownership, so the same deal gets described two ways in the same conversation. "We are raising two on eight" means an $8m pre-money and a $10m post-money. "We are raising two at ten" usually means a $10m post-money and an $8m pre-money. The words "on" and "at" are doing a great deal of work.
The option pool makes it worse. If the round requires the company to create or top up an employee option pool, the question of whether that pool is counted in the pre-money share count or created afterwards changes who bears its dilution. Counted pre-money, the founders and existing holders pay for it. Created post-money, everyone including the new investor pays. This is the option pool shuffle, and it moves several percentage points.
Since the post-money SAFE became standard, the same ambiguity has migrated to caps. A $10m post-money cap and a $10m pre-money cap on a $2m round are different deals.
What it means for your cheque
Always convert whatever you are told into post-money ownership before deciding anything. Ask one question — "what percentage of the fully diluted company will my cheque represent at closing?" — and make the founder answer with a number. If they cannot, the round is not ready.
Then ask whether the option pool is inside or outside the pre-money. A round quoted at an $8m pre-money with a 15% pool created pre-money is really a $6.8m pre-money in economic terms, and the difference is entirely at the expense of people who invested before you.
Do the arithmetic
Where the option pool sits changes your ownership
A company raises $2m at an $8m pre-money. The round also requires a 15% post-closing option pool. Two ways of doing it.
| Version A — pool created inside the pre-money | |
|---|---|
| Effective pre-money for existing holders | $8m less the pool's value — about $6.5m |
| New investor ownership | $2m ÷ $10m = 20% |
| Founders and prior investors | 65%, pool 15% |
| Version B — pool created after closing | |
| New investor ownership before the pool | 20%, diluted by the pool to about 17% |
| Founders and prior investors | about 68% |
Identical headline terms, three percentage points of difference. On a $400m exit that gap is worth roughly $12m to whoever wins the argument.
At the table
What to negotiate
- Ask for the pre-money and post-money figures and the resulting percentages in writing, from the company's own cap table model.
- Establish where the option pool sits. "Fully diluted pre-money including the new pool" is the investor-favourable formulation.
- Check the fully diluted count includes outstanding SAFEs, notes, warrants and promised-but-unissued options.
- If a founder quotes only a pre-money number, do the post-money arithmetic yourself before responding.
- For SAFEs, establish explicitly whether the cap is pre- or post-money — the answer changes your percentage materially.
Pre-money vs post-money: common questions
Which number do founders usually quote?
Why does the option pool affect the valuation at all?
Is a post-money valuation ever the negotiated number?
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