Valuation
Pre-money valuation is what a company is agreed to be worth immediately before new investment goes in, and it is the number that determines how much of the company the new money buys.
Post-money valuation is pre-money plus the amount invested. The two are always one addition apart, but which one a term sheet quotes changes the ownership maths, and confusing them is one of the most common early-stage mistakes.
Investor ownership is the investment divided by the post-money valuation. Founders sometimes calculate against the pre-money figure and arrive at a smaller dilution number than the round actually produces.
Term sheets frequently require an option pool to be created or topped up before the round closes, and to sit inside the pre-money valuation. That means the pool dilutes existing shareholders only, not the incoming investor.
A $8m pre-money with a 10% post-close pool is a different deal from a $8m pre-money with the pool already in place. Ask where the pool sits before comparing two term sheets on headline valuation.
For a fixed investment amount, a higher pre-money means less dilution. What matters is comparing offers on the same basis, including where any option pool sits.
Add the amount being invested. Post-money = pre-money + investment.
Post-money SAFEs make the investor's ownership percentage certain at the point of signing, because it no longer changes when other SAFEs are added. This shifts dilution from the investor to the founders.
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