Pre-money vs post-money valuation — what's the difference?
By SuLe · Updated 23 June 2026
Pre-money valuation is what your company is worth before the new investment goes in; post-money valuation is the pre-money figure plus the new money raised. The distinction decides how much of your company an investor gets: their percentage is their investment divided by the post-money valuation, so which number you mean is worth serious equity.
Key facts
- Pre-money + new money = post-money valuation.
- Investor percentage = investment ÷ post-money valuation.
- Price per share = pre-money valuation ÷ the fully diluted share count before the round.
- The same headline "£4m valuation" gives away 20% if pre-money and 25% if post-money on a £1m raise.
- Always confirm in writing whether a quoted valuation is pre- or post-money before agreeing terms.
What is the actual difference between the two numbers?
Pre-money is your agreed value immediately before the investment. Post-money is that same value with the incoming cash added on top.
The relationship is simple arithmetic: post-money = pre-money + the amount raised. A company valued at £4m pre-money that raises £1m has a £5m post-money valuation.
The reason it matters is ownership. The new investor's percentage is calculated against the post-money figure, so a higher pre-money means the founders keep more, and a lower one means they keep less for the same cheque.
How do I calculate an investor's percentage?
Divide the investment by the post-money valuation. That single formula settles the dilution.
A £1m investment into a £5m post-money company buys £1m ÷ £5m = 20%. The founders and existing holders keep the other 80%, diluted proportionally.
Watch how the quote is framed. "£1m at a £4m valuation" gives you a £5m post-money (20% away) if the £4m is pre-money, but only a £4m post-money (25% away) if the £4m is post-money. Same words, five percentage points of your company — so always pin down which one is meant.
How is the price per share worked out?
Price per share = pre-money valuation ÷ the fully diluted share count before the round. "Fully diluted" means counting all existing shares plus the whole option pool, not just issued shares.
The new investor then receives shares equal to their investment divided by that price. Because the pool is included in the pre-round count, enlarging it lowers the price per share and hands the investor more shares for the same money.
This is exactly why the option pool's placement — pre- or post-money is negotiated so hard. Placed pre-money, the dilution lands on existing shareholders and quietly reduces the effective pre-money you are getting.
Where does this sit in UK deal documents?
The valuation itself is a commercial term, not a statutory one — no law sets your pre-money. But the share issue that follows is governed by the Companies Act 2006, which controls how new shares are allotted and requires the paperwork to be filed at Companies House.
UK priced rounds commonly follow the BVCA model documents, where the subscription price and share numbers flow directly from the agreed pre-money and the fully diluted count. Because those numbers drive the whole cap table, an error compounds through every future round — so the maths is worth checking line by line before completion.
| Pre-money | Post-money | |
|---|---|---|
| Definition | Value before the investment | Value after the investment |
| Formula | Post-money − new money | Pre-money + new money |
| Used to work out | Price per share | Investor percentage |
| Higher number favours | Founders (less dilution) | — |
| Example (£1m raise) | £4m → 20% given away | £4m → 25% given away |
Worked example
Amara is raising for her healthtech startup, which has 1,000,000 fully diluted shares. She agrees a £4m pre-money valuation and a £1m round.
Post-money is £4m + £1m = £5m, so the investor's stake is £1m ÷ £5m = 20%. The price per share is £4m ÷ 1,000,000 = £4.00.
The investor's £1m therefore buys £1m ÷ £4.00 = 250,000 new shares. After the round there are 1,250,000 shares in issue, and the investor's 250,000 is exactly 20% — the maths ties out. Had the £4m been quoted as post-money instead, the investor would take 25% and Amara would keep less.
Where founders go wrong
Not asking "pre or post?"
— the same headline valuation can cost you five percentage points or more; get it stated explicitly in the term sheet.Forgetting the option pool
— a pool added pre-money lowers your effective valuation without changing the headline number.Confusing money raised with money you keep
— post-money includes the new cash, but that cash is the company's runway, not founder value.Skipping the share-count check
— recompute the price per share and resulting percentages yourself; a rounding slip here distorts every later round.
Related questions
How do you calculate post-money valuation?
Add the new investment to the pre-money valuation: pre-money + new money = post-money. A £4m pre-money company raising £1m has a £5m post-money valuation. The investor's stake is their investment divided by the post-money figure — here, £1m ÷ £5m = 20%.
Which valuation determines the investor's percentage?
The post-money valuation. Investor percentage = investment ÷ post-money. So the same £1m cheque buys 20% at a £5m post-money and 25% at a £4m post-money. Always confirm whether a quoted valuation is pre- or post-money before you agree it.
Why does the pre-money vs post-money distinction matter so much?
Because the same headline number means different ownership depending on which one it is. If an investor says "£1m at a £4m valuation" and means post-money, you give away 25%; if it is pre-money, you give away 20%. On larger rounds the gap is worth serious equity.
How is price per share worked out?
Price per share = pre-money valuation ÷ the fully diluted share count before the round, including the option pool. The new investor's shares are then their investment divided by that price. This is why the option pool's placement — pre or post-money — changes the maths. [More: Should the option pool come out of pre-money or post-money?]
Pre-money versus post-money is arithmetic, but the wrong assumption can cost you a chunk of your company on every round it compounds through. A SuLe solicitor can sanity-check the valuation, share count and resulting cap table before you sign, so the percentages you think you agreed are the ones you actually get. Book a free term sheet review and check the maths.
Keep reading: Should the option pool come out of pre-money or post-money? · What is a valuation cap and how does it work? · What is a liquidation preference? · What should a UK seed-stage term sheet include? · How do I issue new shares in a UK company? · What is a cap table and how do I keep it clean?
Primary sources: BVCA — model documents for UK venture capital · Companies Act 2006
