Post-money valuation is the value assigned to a company immediately after a new investment. It includes the cash just added to the company’s balance sheet. section 10.4
Keep these practical points in mind when reviewing a seed financing:
- Calculate post-money valuation by adding the investment to the pre-money valuation. section 10.4
- Treat the valuation as an investor’s judgment, often based on the team, intellectual property, comparable companies, and product stage. section 10.4
- View post-money valuation as a hoped-for floor, not a guarantee: stalled customer acquisition, product failure, or leadership loss can reduce it. section 10.4
A simple seed-round calculation
Suppose investors assign a $1.5 million pre-money valuation and invest $1 million. The post-money valuation is $2.5 million: $1.5 million plus $1 million. At this stage, investors may seek roughly 30% to 40% ownership because the risk is high. section 10.4
Figure 10.1 Pre- and post-money valuations for a sample seed and Series A. Values are in millions, except price per share.
Compare the pre-money and post-money values shown for sample seed and Series A rounds. section 10.4
