Post-Money Valuation
The pre-money valuation plus the money raised in the round. The investor’s stake is the cheque divided by this number, so it is the figure a fund actually underwrites to: a $5m cheque at a $25m post-money is 20%, whatever the pre-money was called. Post-money SAFE caps are quoted on the same basis for the same reason.
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Why Post-Money Valuation matters in interviews
Post-money is the number a fund actually underwrites to, because the stake it buys is the cheque divided by it, and the post-money form of the SAFE made it the number early investors quote too. A candidate who reasons in post-money sounds like an investor; one who reasons in pre-money sounds like a founder reading a press release.
How it works in practice
Post-money = pre-money + money raised. Stake = money raised ÷ post-money. A $5m cheque at a $25m post-money is 20%, and it is 20% whether the pre-money was called $20m with the pool outside or $20m with the pool inside; the pool changes who else was diluted, not the investor’s share.
The fund’s arithmetic runs on it. A $100m fund that needs a single company to return the fund, and expects to hold 10% at exit after dilution, needs that company to be worth $1bn at exit. If it wants to own 15% at entry to have 10% left at the end, and its cheque is $3m, the highest post-money it can accept is $20m. That is why a fund walks away from a round it likes at a valuation it cannot make work, and why "what post-money can you do" is the real question in a first meeting.
Post-money SAFE caps use the same convention. A $500k SAFE at a $5m post-money cap is 10% of the capitalisation before the next round, exactly as a $500k cheque at a $5m post-money in a priced round would be, which is why the 2018 form was written that way: the SAFE holder can read their fraction off the cap without waiting for the round.
What candidates get wrong
- Using post-money of the last round as the company’s value. It is the price the last marginal investor paid for preferred stock with a preference, not what the common is worth.
- Forgetting the next round dilutes it. A 20% stake at seed is around 15% after a Series A and 10% by a Series C; funds model to the stake at exit, not at entry.
- Adding SAFE money to the pre-money. SAFEs convert inside the pre-money capitalisation; only the new priced money is added to reach post-money.
Post-Money Valuation: frequently asked questions
What is a post-money valuation?
The pre-money valuation plus the money raised in the round, and therefore the value of the company with the new cash in it. An investor’s ownership after the round equals the money they invested divided by the post-money valuation, which is why funds negotiate in post-money terms: it is the number that fixes the stake.
Why is a SAFE cap quoted post-money?
Because a post-money cap fixes the SAFE holder’s fraction of the company immediately before the next priced round at the amount invested divided by the cap, so the holder knows their stake when they sign rather than after the round. The original pre-money SAFE left that fraction dependent on how many other SAFEs converted alongside it.
Practise it
Take a company from founding through a SAFE and a priced seed round. Set the cap, the pre-money and the option pool, watch the price per share and every holder’s stake move, then check your own arithmetic against the table.
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