Postmoney

Postmoney is a term used in startup finance to denote the valuation of a company immediately after a financing round has closed. It reflects the company’s value after new capital is added and is typically compared with pre-money valuation, which measures value before the investment.

The post-money valuation is generally calculated as pre-money valuation plus the amount of new equity investment. This valuation is used to determine ownership percentages: an investor’s stake is the investment amount divided by the post-money valuation. For example, if a company has a pre-money valuation of 4 million and raises 1 million, the post-money valuation is 5 million, and the investor would own 1/5 or 20% of the company, all else equal.

Postmoney is central to venture fundraising and cap table management. It is commonly used in SAFEs (simple agreements for future equity) and convertible notes, where a post-money valuation cap fixes an investor’s percentage after the next priced round. However, post-money structures can lead to greater dilution for founders if the pool of option awards or future issuances is not accounted for in the post-money calculation.

Variants and considerations include fully diluted post-money, which accounts for all potential shares from options and convertible securities, and basic post-money, which may omit some potential dilutive elements. In practice, the choice between post-money and pre-money frameworks, and how the option pool is treated, can significantly impact the cap table and future ownership dynamics; careful modeling and legal guidance are recommended.