Pre-money vs post-money: which valuation governs a funding round?

Post-money, not pre-money, sets an investor's real percentage.

Introduction: pre-money vs post-money, which valuation actually governs a funding round?

Two figures are enough to derail a fundraising negotiation: the pre-money valuation an investor proposes, and the post-money valuation that results once the funds are injected. Confusing the two is not a semantic detail, it directly changes the percentage of the company founders keep once the round closes.

The pre-money valuation is the value attributed to the company before new investors come in, while the post-money valuation is that same value increased by the amount actually raised. The relationship is arithmetic and non-negotiable once the first two terms are fixed: post-money equals pre-money plus the amount invested.

"How much dilution an existing shareholder suffers depends directly on which convention, pre-money or post-money, is used to set the issue price of the new securities.", venture financing market practice, as documented by Y Combinator for its standard contract.

Three factors make this distinction more sensitive than it looks in 2026. First, the spread of convertible instruments, SAFEs in the United States and BSA-AIR in France, has introduced valuation caps whose basis, pre-money or post-money, radically changes the percentage an investor ends up with at conversion. Second, the practice of creating an option pool before the round, known as the option pool shuffle, loads extra dilution onto existing shareholders alone without the headline pre-money figure making that explicit. Third, stacking several successive convertible instruments on the same company makes total dilution increasingly hard to anticipate without rigorous cap table modelling.

This article covers the definition, origin and calculation of pre-money and post-money, explains why Y Combinator changed its SAFE convention in 2018, breaks down the option pool shuffle mechanism, then illustrates these concepts with two worked cases, a French Series A and a Swiss seed round in BSA-AIR, before answering the ten questions most frequently asked by founders and investors on the topic.

Pre-money: the value attributed to the company before new funds enter the round.
Post-money: pre-money increased by the amount actually raised, the basis for calculating the investor's percentage.
Cap table: the table allocating ownership among all shareholders, founders, investors and option holders.
Option pool shuffle: creating an option pool before the round, which dilutes existing shareholders only, not the new investor.

Secure your next funding round

Before signing a term sheet, talk to Hectelion's teams about structuring your pre-money, post-money and the associated option pool. Book a first 30-minute call to discuss the context of your round, the instrument envisaged, priced equity, SAFE or BSA-AIR, and the room to negotiate on valuation.

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Before negotiating a pre-money, you first need a reliable order of magnitude for the value of the company being raised for. Hectelion has developed Acontos, an online audit, due diligence and business valuation tool, powered by Anthropic's Claude Sonnet 5 artificial intelligence and calibrated on Hectelion's methodology. Based on your accounts, it produces a first estimate of the value of your shares within minutes, free of charge and without retaining any document. Launch the valuation simulator to get an order of magnitude, then keep reading to understand what drives it.

Definition: what is pre-money valuation and post-money valuation?

Pre-money valuation is the amount existing shareholders and an investor agree to attribute to the company before the new funds are injected. It is the basis for the price per share of the newly issued securities, calculated by dividing the pre-money by the number of shares existing before the round. Post-money valuation, in turn, is a mechanical consequence of the former: it is the pre-money increased by the amount raised, and it is this figure, not the pre-money, that determines the percentage of the company an investor actually holds after the deal, since that percentage is obtained by dividing the amount invested by the post-money.

The same headline figure in a term sheet can therefore be read two opposite ways: a €2.0 million investment announced on a €10.0 million valuation gives the investor 16.7% of the company if that €10.0 million is read as pre-money, with the real post-money then standing at €12.0 million, but 20.0% if that same €10.0 million is in fact the post-money, the gap between the two readings amounting to more than three percentage points on the basis of an identical figure and an identical amount invested.

This relationship becomes sensitive as soon as a term sheet calls for an option pool to be created before the round: the announced pre-money then already includes that pool, which reduces the effective share of existing shareholders without the pre-money figure signalling it explicitly. This is why reading a term sheet can never stop at the headline pre-money figure alone, it must always factor in how the option pool is treated and the fully diluted share count used for the calculation.

Quick definition: pre-money in one sentence

Pre-money is the value attributed to the company before new funds enter, the basis for the price per share of the securities issued in the round.

Quick definition: post-money in one sentence

Post-money is the pre-money increased by the amount raised, and it is this figure that determines the new investor's actual percentage of the company.

Origin: where does the pre-money and post-money distinction come from?

The distinction itself is as old as venture capital practice: any funding round through the issuance of new shares has always required setting a price per share, itself derived from a reference valuation before the deal. The pre-money and post-money terminology standardised across North American venture capital from the 1980s and 1990s onward, as specialised law firms and funds structured increasingly formalised term sheets for Series A rounds and beyond.

The distinction took on new importance with the spread of convertible instruments for seed rounds. The American accelerator Y Combinator did much to popularise the SAFE (Simple Agreement for Future Equity) from 2013 onward, an instrument that deferred a price per share to a later round while fixing a valuation cap. That cap could initially be expressed on a pre-money basis, which made each investor's final percentage unpredictable as soon as a round included several SAFEs. In France, the BSA-AIR (Accord d'Investissement Rapide), the French equivalent of the SAFE, adopted a similar cap-and-discount logic, legally grounded in the regime for securities giving access to capital under article L.228-91 of the French Commercial Code.

Pre-money vs post-money: why did the SAFE change convention in 2018?

Y Combinator changed the convention of its standard SAFE in 2018, moving from a valuation cap expressed pre-money to one expressed post-money. According to the accelerator's official documentation, the choice is meant to ensure that "the amount of ownership sold is immediately transparent and calculable for both the founder and the investor," since the post-money cap already accounts for every amount raised by SAFE in the same round. With a pre-money cap, each SAFE issued dilutes the other SAFEs already signed, without their holders being able to know their final percentage before the round fully closes; with a post-money cap, each investor knows their percentage at signing, since the "post" cap already accounts for all SAFE money raised, excluding the new option pool and the new money of the subsequent priced round.

This clarity, however, has a downside documented by startup finance practitioners: a post-money cap places the entire dilution from the round's SAFEs onto founders alone, whereas a pre-money cap, by construction, spread it among the various SAFE holders. The choice of convention is therefore not neutral for founders, and should be negotiated knowingly rather than accepted as a mere boilerplate clause carried over from a standard contract.

Why does confusing pre-money and post-money cost founders dearly?

It leads to accepting an option pool included in the pre-money without measuring its real effect on existing shareholders, who alone absorb the corresponding dilution.
It prevents comparing two competing term sheets on a like-for-like basis when one expresses its cap pre-money and the other post-money.
It distorts the perceived value progression between two successive rounds, since the closing post-money of one round mechanically becomes the reference pre-money of the next.
It complicates anticipating cumulative dilution when several convertible instruments, SAFEs or BSA-AIR, are stacked before an equity round.
It exposes the parties to calculation disputes at the time instruments convert, each side potentially having reasoned on a different basis without spelling it out in the contract.

How is a funding round's dilution calculated?

Determine the total number of shares existing before the round, including options already granted and not just issued shares.
Negotiate the pre-money valuation and explicitly check whether or not it includes the creation of a new option pool.
Calculate the post-money by adding the amount raised to the pre-money as defined.
Determine the price per share by dividing the pre-money by the number of shares existing before the round, including the option pool if it is pre-money.
Calculate each new investor's percentage by dividing their investment by the post-money.
Rebuild the full cap table after the deal to check that the percentages of all parties, founders, existing investors, the option pool and new investors, add up to exactly one hundred percent.

The option pool shuffle trap: how does the pool dilute founders twice?

The option pool shuffle refers to the practice of requiring the creation, or enlargement, of the employee option pool before the round closes, and including it in the pre-money rather than the post-money. Mechanically, creating the pool upfront loads the entire dilution from the pool onto existing shareholders alone, usually the founders, since the new investor's percentage is calculated on a post-money that already includes the pool, without bearing its dilution cost themselves.

A simple worked example illustrates the mechanism. For a negotiated pre-money of €10.0 million including the creation of a 10% fully diluted post-round option pool, and a €3.0 million raise, the post-money comes to €13.0 million. The new investor gets 3.0 / 13.0, or 23.08% of the company. The option pool represents 10% of the post-money, or €1.3 million in value. Existing shareholders, founders included, are left with 10.0 minus 1.3, or €8.7 million in value out of a €13.0 million total, that is 66.92% of the company, instead of the 76.92% a naive calculation, ignoring that the pool is charged against the pre-money alone, might have suggested. Founders are thus diluted twice, first by the creation of the pool, then by the new investor coming in.

When should you negotiate on a pre-money basis rather than post-money?

Situation	Pre-money basis	Post-money basis
Cap on a SAFE or a BSA-AIR	Final percentage uncertain if several instruments are issued	Percentage known at signing
Who bears the option pool's dilution	Existing shareholders alone	Shared between existing shareholders and the new investor
Comparing several term sheets	Requires restating each offer on a common basis	Direct comparison if all offers are post-money
Typical profile	Founder seeking not to bear the pool's cost alone	Investor seeking immediate clarity on their percentage

In practice, the issue is not choosing one convention in the abstract, but making sure the pre-money, the post-money and the treatment of the option pool are all spelled out together in the term sheet.

Who should you turn to for structuring a funding round?

Three criteria help select the right adviser. First, experience modelling cap tables on comparable rounds, essential for precisely pricing the effect of an option pool or a SAFE cap before signing. Second, rigorous business valuation capability, since the negotiated pre-money must rest on a defensible methodology rather than a mere market rule of thumb. Third, economic independence from traditional financial intermediaries, to objectively advise the founder on which convention, pre-money or post-money, best suits their situation, free of any bias linked to a fundraising commission.

Hectelion supports these deals as part of its fund raising service, drawing on dual French and Swiss expertise and its startup valuation engagements to document the pre-money retained. The cost of this advisory, often structured as a fixed fee plus success fee, is covered in a dedicated article on the price of a fundraising round.

Advantages: clarity, alignment, negotiation

A post-money basis offers immediate clarity on the percentage each investor obtains, which reduces calculation disputes at the time a SAFE or a BSA-AIR converts.
A pre-money basis, conversely, leaves the founder room to negotiate how the option pool is treated, since including or excluding it from the pre-money remains an explicit negotiation point rather than an imposed convention.
Understanding the pre-money and post-money mechanics precisely allows several competing term sheets to be compared on a like-for-like basis, by restating each offer under the same convention before weighing them against each other.
A cap table rebuilt after every round, pre-money and post-money combined, serves as a reliable reference for anticipating dilution in subsequent rounds, Series A, B and beyond.

Limits: rigidity, ambiguity, over-dilution

A post-money cap, while it clarifies each investor's percentage, loads the entire dilution of the round onto founders alone, an effect that startup finance practitioners explicitly flag as potentially disadvantaging founders compared with a pre-money cap.
A pre-money figure announced without clarity on how the option pool is treated remains ambiguous, and that ambiguity often only surfaces once the cap table is rebuilt after the round is signed.
Stacking several convertible instruments before a Series A round significantly complicates the negotiation, as each earlier cap must be restated according to whichever convention, pre-money or post-money, it was originally set on.

The 5 mistakes to avoid

Mistake 1: Accepting a pre-money without checking how the option pool is treated

Signing a term sheet that mentions a pre-money without explicitly checking whether it includes the creation of a new option pool leads to underestimating the dilution actually suffered by existing shareholders, sometimes by several percentage points.

Mistake 2: Comparing two term sheets expressed under different conventions

Directly comparing a term sheet expressing its cap pre-money against another expressing it post-money, without restating both offers on a common basis, leads to a distorted decision, as the seemingly more generous offer can turn out to be the less favourable one once the two figures are made homogeneous.

Mistake 3: Stacking SAFEs or BSA-AIR without modelling cumulative dilution

Issuing several convertible instruments in succession without modelling their simultaneous conversion at the next round exposes the company to cumulative dilution well above what was anticipated instrument by instrument, particularly when the caps are expressed on a pre-money basis.

Mistake 4: Neglecting the anti-dilution clause in the event of a down round

Failing to negotiate a suitable anti-dilution clause exposes existing shareholders to worsened dilution if a later round prices at a lower valuation, the full ratchet mechanism being markedly harsher on founders than the weighted-average one.

Mistake 5: Confusing the negotiated pre-money with the company's real value

Treating the pre-money negotiated with an investor as a reliable measure of the company's economic value leads to flawed decision-making, since the pre-money is a negotiated price shaped by how scarce the round is and how urgent the financing need is, not a valuation derived from an independent methodology. That figure results above all from the company's stage of maturity, the competitive tension between several term sheets, the traction metrics presented to investors and the macroeconomic climate of the moment, four market factors that have nothing to do with an independent valuation methodology.

Case 1: French Series A of €3.0 million with a pre-money option pool

A French SaaS startup negotiates a Series A of €3.0 million on a pre-money of €10.0 million, the investor's term sheet requiring the creation of a 10% fully diluted post-round option pool included in that pre-money. The post-money comes to €13.0 million. The new investor gets 3.0 / 13.0, or 23.08% of the company. The option pool represents 10% of the post-money, or €1.3 million. Founders and existing shareholders therefore share 10.0 minus 1.3, or €8.7 million in value, that is 66.92% of the post-round company, the arithmetic check confirming that 23.08% plus 10.00% plus 66.92% add up to one hundred percent.

Case 2: Swiss seed round of CHF 1.5 million in BSA-AIR with a post-money cap

A Swiss deeptech startup raises CHF 1.5 million from three investors through BSA-AIR, each contributing CHF 0.5 million, on a post-money valuation cap of CHF 6.5 million fixed from the first contract signed. Each investor immediately knows their percentage at conversion, 0.5 / 6.5, or 7.69% of the company, regardless of the order in which the three BSA-AIR are signed. Had the same round been structured with a pre-money cap of CHF 5.0 million instead, each investor would initially have calculated 0.5 / 5.0, or 10.0%, at signing, only to discover at the round's close that the pre-money cap, once the three BSA-AIR's combined CHF 1.5 million was added, resulted in the same CHF 6.5 million post-money and therefore the same final 7.69% percentage, but only after the three investors had unknowingly diluted one another at signing.

Word from the CEO

"Pre-money and post-money are not two equivalent ways of saying the same thing, they are two calculation conventions that concretely change who bears the dilution of a funding round."

"In our French and Swiss practice, most of the cap table disputes we see are not about the valuation figure itself, but about the lack of contractual clarity on how the option pool is treated and on which basis, pre-money or post-money, earlier convertible instruments were set."

"A founder who understands the post-money mechanics negotiates differently, and often better, than a founder who focuses solely on the headline pre-money figure.", Aristide Ruot, Ph.D., Founder and Chief Executive Officer, Hectelion SA.

FAQ: the 10 essential questions on pre-money and post-money

Introduction: what to know before the questions

The questions below cover the most frequent concerns Hectelion hears from founders and investors about pre-money and post-money mechanics, complementing the definitions and worked cases detailed above.

Q1: What is the exact formula linking pre-money and post-money?

Post-money equals pre-money plus the amount actually raised in the round, that is post-money equals pre-money plus investment, a purely arithmetic relationship once the first two terms have been negotiated.

Q2: How do you calculate the percentage a new investor obtains?

A new investor's percentage is obtained by dividing the amount they invest by the post-money valuation, not the pre-money valuation, a frequent mix-up that leads to overestimating the actual percentage held.

Q3: Should the option pool be included in the pre-money or the post-money?

Both practices exist and must be explicitly negotiated: a pool included in the pre-money dilutes existing shareholders only, while a pool included in the post-money spreads the dilution between existing shareholders and the new investor.

Q4: Why did Y Combinator adopt the post-money SAFE in 2018?

Y Combinator adopted the post-money cap so that every SAFE investor would immediately and certainly know their final ownership percentage, without depending on how many other SAFEs were issued in the same round, a transparency the pre-money cap did not guarantee.

Q5: Is a post-money cap always more favourable to the founder?

No, a post-money cap loads the entire dilution from the round's convertible instruments onto founders alone, whereas a pre-money cap spread it among the various holders, which can ultimately be more favourable to founders depending on how many instruments were issued.

Q6: How do you rebuild a cap table after a funding round?

List every share existing before the round, add the new shares issued to the investor and to the option pool if one is created at that point, then check that the percentages of all parties add up to exactly one hundred percent on a post-money basis.

Q7: What is the difference between a BSA-AIR and a classic equity round?

A BSA-AIR defers setting a price per share to a later round, fixing only a cap and, where applicable, a valuation discount at signing, whereas a classic equity round immediately fixes a final pre-money and price per share.

Q8: How is dilution calculated when several BSA-AIR are issued in the same round?

If the caps are expressed post-money, each investor knows their percentage at signing; if they are expressed pre-money, each investor's actual dilution can only be known with certainty once the round fully closes and all amounts raised are added up.

Q9: Does the negotiated pre-money reflect the company's real value?

No, the pre-money is a negotiated price between a company and a given investor, shaped by how scarce the round is and how urgent the financing need is, which does not replace an independent business valuation based on a documented methodology.

Q10: How does the anti-dilution clause change the pre-money calculation of a later round?

An anti-dilution clause retroactively adjusts the price per share obtained by an existing investor if a later round prices at a lower valuation, the full ratchet mechanism resetting that price in full while the weighted-average mechanism only adjusts it partially.

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Conclusion: pre-money and post-money, two faces of the same valuation

Pre-money and post-money do not describe two different values of the company, but two moments of the same deal, before and after the new funds are injected. Their arithmetic relationship is simple, post-money equals pre-money plus the amount raised, but its practical application gets complicated as soon as an option pool or a convertible instrument comes into play, since it is then the contractual treatment of those elements, not the formula itself, that determines the final allocation of ownership.

Y Combinator's change of SAFE convention in 2018 illustrates well that the choice between a pre-money and a post-money basis is never neutral: it shifts the burden of dilution between the parties rather than making it disappear. An informed founder therefore negotiates less over the headline pre-money figure in the abstract than over the convention used to calculate it and the explicit treatment of the option pool, the two points that in practice determine most of the dilution they will bear.

In both cases studied, the French Series A and the Swiss BSA-AIR seed round, rebuilding the cap table arithmetically after the deal remains the only reliable way to make sure each party gets the percentage it believes it is entitled to, rather than relying solely on the headline valuation figure shown in the term sheet.

Summary

Pre-money is the value attributed to the company before new funds enter, post-money that same value increased by the amount raised, and it is the post-money, not the pre-money, that determines the actual percentage a new investor obtains. This simple relationship gets complicated as soon as the term sheet calls for an option pool created before the round, a practice known as the option pool shuffle, which loads extra dilution onto existing shareholders alone.

Y Combinator changed its SAFE convention in 2018, from pre-money to post-money, to guarantee every investor immediate visibility on their final percentage, a choice that nonetheless has the effect of concentrating the round's convertible-instrument dilution onto founders alone. The two worked cases, a French Series A at a €10.0 million pre-money with the pool included, and a Swiss BSA-AIR seed round at a CHF 6.5 million post-money cap, illustrate both mechanics with verifiable calculations.

Hectelion supports the structuring of these deals as part of its fund raising and startup valuation engagements, with particular attention to documenting the pre-money retained and to contractual clarity on how the option pool is treated.