ContractsCounsel Logo

Post-Money Valuation

Updated: March 28, 2023
Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 10,608 reviews
No Upfront Payment Required, Pay Only If You Hire.
Home Blog Post-Money Valuation

Jump to Section

What Does Post-Money Valuation Mean?

Post money valuation refers to the total worth of an enterprise after the injection of funds from investors. It indicates how much your company is worth after an investment.

The post-money valuation is essential because it shows the total value of your company after receiving outside funding. In addition, investors usually use this number to determine the percentage of ownership they have in a startup based on the amount they invest.

The post-money valuation determines how much equity each investor receives for their money. If you're raising money, you should know what your company is worth (or what investors will pay for it). You also need to know how much money you want to raise and how much control you're willing to give up.

Post-money helps a business:

  • Determine the number of shares owned by investors. The fundamental essence of post-money value is to calculate the percentage of a business that has been sold out. Deducting the business' post-money value from its previous value establishes the amount of equity possessed by investors.
  • Attract investment deals. A high valuation paints a successful picture in the market. Investors are thus more convinced that injecting their money into the business will give them better returns in the long run.
  • Motivate employees. Employees' compensation stock options are aligned with the post-money valuation. As a result, the post-money valuation directly impacts employees' capacity to execute their stock options.
  • Determine success. If the pre-money valuation arrived at after a round of financing is higher than the previous round's post-money valuation, it is a sign of success. It shows that investors are progressively valuing your business more.

How is Post-Money Valuation Calculated?

Post-money valuation is calculated by adding the pre-money valuation to the amount of money raised in a financing round.

The formula for calculating post-money valuation can be expressed as follows:

Post-Money Valuation = Pre-Money Valuation + Money Raised

Post-Money Valuation Example

Let's go through a three-step example of post-money valuation to get a clear snapshot of its application.

Step 1

Assume a business has a pre-money valuation of $200 million. Before the financing round, the business has two million outstanding shares, equating to a share price of $100 per share.

Step 2

The business undertakes a round of financing, which sees it issue 460,000 new shares. The funding raises $46 million of new equity at the pre-money valuation of $200 million.

Step 3

The business will thus add $46 million to its balance sheet to move from a pre-money valuation of $200 million to a post-money valuation of $246 million.

Meet some lawyers on our platform

Zachary J.

349 projects on CC
CC verified
View Profile

Bryan B.

259 projects on CC
CC verified
View Profile

Scott S.

61 projects on CC
CC verified
View Profile

Daniel K.

7 projects on CC
CC verified
View Profile

Is Post-Money Valuation the same as Enterprise Value?

The post-money valuation changes when it receives external funding, but its enterprise value is not affected.

The post-money valuation and the enterprise value measure how much a company is worth. The difference is that Enterprise Value also includes the value of any debt the company has, while Post-Money Valuation only includes equity.

Enterprise Value = Post-Money Valuation + Debt

We can rearrange the equation to get Post-Money Valuation:

Post-Money Valuation = Enterprise Value - Debt

For example, suppose a company has $200 million in post-money valuation (equity) and $50 million in debt. It would have an enterprise value of $250 million:

Enterprise Value = $200M + $50M = $250M

Likewise, we could find the post-money valuation if we knew the enterprise value:

Post-Money Valuation = $250M - $50M = $200M

Enterprise value (EV) is the amount you would have to pay to take over a company, including all debt and cash.

Enterprise Value (EV) equals Market Capitalization + Preferred Stock + Debt - Cash and Cash Equivalents. Some people will include minority interests in this number.

Post-Money Valuation vs. Pre-Money Valuation

The term "pre-money" means the company's valuation before an infusion of capital, and "post-money" means the company's valuation after capital injection. The difference between the two is the timing of valuations.

However, they are related in that; the post-money valuation is equal to the pre-money valuation plus the amount of new equity that results from the investment.

For example:

Post-money Valuation = Pre Money valuation + The Funding Raised

Pre-money valuation shows:

  • the current value of a business.
  • The value of each issued share

The difference between the pre-money valuation and Post money valuation is essential when an entrepreneur has a great investment idea but is under the constraints of assets.

Here is a more detailed article on how pre and post-money valuations differ.

Who Uses Post-Money Valuation?

There are two groups of people who use post-money valuation: investors and founders.

Investors can use post-money valuation to understand how much equity they will receive. The post-money valuation is directly tied to the percentage of ownership that an investor will buy in a company. For example, suppose a company has a $10 million post-money valuation. An investor is willing to invest $2 million for 20% ownership. In that case, the pre-money valuation must be $8 million.

Startup founders are concerned with post-money valuations. Founders want their companies to be successful. Post-money valuations can be helpful in multiple ways to ensure success.

Suppose a founder knows they will be raising more money in the future. In that case, they should ensure that the last round did not overvalue the company. Likewise, founders need to make sure that they don't sell too much equity in their company so early.

What is a Post-Money Valuation Cap?

A post-money valuation cap protects investors against the possibility that future financing rounds may use lower valuations. A post-money valuation cap is typically set at a discount to the pre-money valuation of a previous round.

It is often used in series seed financings. In a typical seed deal, investors will be given the right to convert their debt or preferred shares into the company's common shares later. As a result, you often see valuation caps in a SAFE Note and a Convertible Note.

The conversion price may be set in advance (i.e., by reference to a discount off the next round valuation), or it may be set at that later date (i.e., by calculating the price per share each investor paid divided by the number of shares they are entitled to receive). In either event, companies and investors may agree to a post-money valuation cap when negotiating the terms of the convertible security.

Let’s take a quick example of a scenario where a post-money valuation cap is applied.

Step 1

So, suppose you are offered a $1.25 million post-money cap on a $1 million pre-money valuation. Your company has 10% founders’ stock outstanding. What happens to the founders’ stock in this scenario?

Step 2

The math is easy: Your company's new valuation is $2.25 million, and the founders have 10% of that, which equals $225,000. Since they had $100,000 invested in their seed round, they've now got $125,000 of "return" on their investment. They haven't sold any shares yet; they're just seeing what their paper returns are based on the new valuation.

Step 3

Now let's say that your company has raised a Series A round of financing at a $5 million pre-money valuation (with no cap). You will have raised two rounds after the Series A round closes: seed capital at a $1 million pre-money valuation and Series A capital at a $5 million pre-money valuation. There will be two different shares (founders’ stock and Series A preferred stock) with varying liquidation preferences for each class of stock.

Get a more detailed scope of the post-money valuation cap in this article.

Fully Diluted Post-Money Valuation

A company's post-money valuation fully diluted is the company's value after it has issued all its possible shares and granted all possible stock options.

Investors commit to purchasing a certain number of shares at a specific price in the funding round, known as the pre-money valuation. After that money is invested, the company's total value (including the investment) is called the post-money valuation. Once that happens, no more shares can be issued without watering down existing shareholders' ownership stakes.

The fully diluted post-money valuation refers to what happens if all convertible securities have been converted or exercised into shares. There aren't any other share issuances left to be had.

In the case of options and convertible securities like convertible preferred stock, it's possible for them to never convert into shares (options may expire unexercised, for example). In those cases, they won't affect the company's fully diluted post-money valuation.

The fully diluted post-money valuation is calculated by multiplying the number of shares outstanding plus the total number issued if all options and warrants were exercised.

This article explains deeper on dilution of shares.

Get Help with Fundraising

Do you need help with fundraising and understanding different options as a founder? Post a project in ContractsCounsel’s marketplace to get flat fee bids from lawyers to help you with your project. All lawyers are vetted by our team and peer-reviewed by our customers for you to explore before hiring.

Meet some of our Lawyers

Christopher R. on ContractsCounsel
View Christopher
5.0 (11)
Member Since:
August 25, 2020

Christopher R.

Free Consultation
Boston, MA
10 Yrs Experience
Licensed in MA, NH
Suffolk University Law School

Corporate and transactional attorney in sixth year of practice. Focus areas include general corporate counsel, labor and employment law, business partnership matters, securities matters related to privately-held companies, and regulatory compliance in securities and finance matters.

Thomas L. on ContractsCounsel
View Thomas
5.0 (1)
Member Since:
March 21, 2023

Thomas L.

Free Consultation
Wethersfield, Connecticut, USA
40 Yrs Experience
Licensed in CT
University of Connecticut Law School

I am a Lawyer/CPA/Technology Startup Advisor/Executive with experience in global corporate law and finance, startup finance, accounting, technology, and business operations with a focus on startups of all kinds and non-profits. I have worked at a large international finance law firm, one of the Big Four Accounting firms, technology startups and non-profits. I help startups and non-profits get organized, get funded, and get going. I've seen all the mistakes made (often more than once), and so I can help you learn from, rather than repeat, history. I know all the insider rules, so you end up getting a fair start and a fair deal, rather than getting taken advantage of (whether an entrepreneur or an investor). My expertise includes: - organization of corporations | organizations of llcs | non-profits and dealing with the IRS - splitting equity | founder structure | founder equity | founder disputes - startup valuation | pitch decks and forecasts | raising capital | finding angel investors, accelerators and venture investors - SAFEs | convertible notes | preferred stock | restricted stock | stock options | 409A - Advisors - setting up cyber-secure business operations - trademarks | patents | intellectual property - employment law - cyber liability and ecommerce including privacy policies and terms of service - accounting and tax - litigation management References: LION: LinkedIn Open Networker / connect with me at

Connie C. on ContractsCounsel
View Connie
5.0 (18)
Member Since:
June 14, 2023

Connie C.

Free Consultation
10 Yrs Experience
Licensed in TN
Nashville School of Law

Connie Chadwick presently focuses her law practice in Tennessee on flat fee legal services which commonly include family court settlements such as divorces, child support orders, custody agreements; contracts; business formation services; and estate plans. Connie is also a Tennessee licensed residential general contractor with over fifteen years of experience in the construction field. With both legal and construction experience, Connie is a logical choice for contractor disputes. Connie earned her Doctorate of Jurisprudence from The Nashville School of Law after earning her Bachelor of Science in Accounting and Finance from Lipscomb University. Connie Chadwick is recognized by peers and was selected to SuperLawyers Rising Stars for 2017 - 2023. This selection is based off of an evaluation of 12 indicators including peer recognition and professional achievement in legal practice. Being selected to Rising Stars is limited to a small number of attorneys in each state. As one of the few attorneys to garner the distinction of Rising Stars, Connie Chadwick has earned the respect of peers as one of the top-rated attorneys in the nation.

 on ContractsCounsel
Member Since:
June 18, 2023

Free Consultation
43 Yrs Experience
Gaille G. on ContractsCounsel
View Gaille
Member Since:
June 12, 2023

Gaille G.

Corporate Leasing Counsel
Free Consultation
Miramar, Florida
11 Yrs Experience
Licensed in FL
St. Thomas University-JD

I specialize in reviewing, drafting and negotiating commercial real estate contracts. I have over 10 years of experience in the areas of cell tower leases and retail shopping center leases.

Cannon M. on ContractsCounsel
View Cannon
Member Since:
June 12, 2023

Cannon M.

Free Consultation
Oklahoma City, Oklahoma
4 Yrs Experience
Licensed in OK
Oklahoma City University School of Law

I am an Oklahoma-licensed lawyer with a focus on guiding startup companies through important early-stage questions, such as entity formation, corporate governance, and fundraising. In my previous role, I drafted Form 1-A offering circulars, Form C offering circulars, and private placement memoranda for startups seeking to raise capital.

Find the best lawyer for your project

Browse Lawyers Now

Need help with an Investment Contract?

Create a free project posting
See All Business Lawyers
Learn About Contracts
See More Contracts
other helpful articles

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

Need help with an Investment Contract?

Create a free project posting

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city