What is Post-Money Valuation?
The Post-Money Valuation is the value of your company immediately after the investment amount from a financing round has been added to the company's balance sheet.
This figure is critical because it represents the total value of the company and is the denominator used to calculate the exact percentage of equity the new investor receives.
The Simple Formula The calculation for Post-Money Valuation is straightforward:
Pre-Money Valuation + Investment Amount = Post-Money Valuation
A Practical Example If you and your investor agree that your company is worth £4 million before the investment (Pre-Money), and the investor puts in £1 million (Investment Amount), your Post-Money Valuation is £5 million.
Why it Matters for Dilution The investor's ownership percentage is determined by dividing their investment amount by the Post-Money Valuation:
£1 Million Investment ÷ £5 Million Post-Money Valuation = 20% Ownership
A founder must be diligent in tracking this number, as it directly impacts how much equity remains for themselves and the employee option pool.
Note: Valuation Caps set in early-stage convertible instruments (like SAFEs or ASAs) effectively define the maximum Post-Money Valuation that the investor will participate in during the next funding round.
Key Takeaway: The Post-Money Valuation is the total price tag of your company right after the deal closes. It is the number used to calculate the percentage of equity you sold.
