Post-Money Valuation
Post-money valuation is the value of a company immediately after a funding round: the pre-money valuation plus the money raised, or, equivalently, the round's price per share multiplied by all shares outstanding after it. It is the number the press reports, the number "unicorn" refers to, and the number a company's next round is measured against — and it is the price of the last shares sold, not what the whole company would fetch.
- Also known as
- Post-money, Post-money value
- Used at
- every priced round; in post-money SAFEs, where the investor's percentage is fixed against it; in press releases and league tables
- Binding
- as arithmetic, yes; as a statement of what the company is worth, no — the new investors bought preferred shares with protections the other shares lack
- Typical arithmetic
- post-money = pre-money + amount raised; investors' stake = amount ÷ post-money; the next round's "step-up" is its pre-money divided by this round's post-money
- Typical gap between the headline and reality
- the preferred shares' liquidation preference means common shares are worth less than the round price implies — studies have put the average overstatement of unicorn valuations at around 50%
- Parties
- the company, its investors, the press, and the employees who value their options on it
How post-money valuation works in practice
A round of €10m at a €40m pre-money gives a €50m post-money. The company now has €10m more cash and the investors own 20%. Whether the company is "worth" €50m depends on what the 20% bought: preferred shares with a 1× liquidation preference, anti-dilution protection, consent rights and a board seat. Those shares are worth €10m to the fund in most scenarios; the common shares, without the protections, are not worth €40m in the scenarios where the preference bites. The post-money is the price of the preferred shares grossed up to the whole company, and it overstates the value of everything that is not preferred.
The number is still what the market works with. The next round's investors quote a step-up against it; the company's employees are told their options are worth a fraction of it; the secondary market for the company's shares prices at a discount or premium to it; and a company that raised at a €1bn post-money is a unicorn, whatever the preference stack says. The discipline is to know the difference — and, in a downturn, to remember that a post-money set in 2021 is a number the next round has to clear or be a down round.
Post-money SAFEs, the standard since 2018, use the term literally: the investor's percentage is its investment divided by the post-money cap, fixed regardless of how many other SAFEs the company issues before the priced round — which protects the SAFE investor and concentrates the dilution on the founders.
Example
A fintech raises €15m at a €60m pre-money: €75m post-money, 20% to the round, preferred shares with a 1× non-participating preference. Two years later it is sold for €60m. The preferred holders take €15m first — their preference, because 20% of €60m is only €12m — and the remaining €45m goes to the common holders, who own 80% of the company and receive 75% of the proceeds. Had the company sold for €150m, the preferred would have converted and taken their 20%, €30m. The €75m post-money was the value at which the preferred shares were sold; it was never a price for the common.
Common mistakes
- Employees valuing options at the post-money price per share without the preference stack. - Reading a step-up in post-money as value creation when it was the market re-rating. - Raising at a post-money the company cannot grow into before its cash runs out. - Issuing several post-money SAFEs without modelling that each fixes its own percentage, so founders absorb all of the dilution. - Press and league tables summing post-money valuations as if they were market capitalisations.