Definition
Post-money valuation is a metric that looks at your entire company. It includes the total amount of equity given to purchase & debt taken on in order to start a company. This is often used as an evaluation tool for whether or not a company is healthy.
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There is a company that recently closed a funding round with a VC firm for $5 million. The pre-money valuation of the company at the time of this funding round was $15 million, meaning that the post-money valuation following this fundraising event is now $20 million.
Post-money valuation is a measure of a company's value after new investment has been made. It takes into account both the pre-money valuation and the new investment amount to calculate their total value.
In this case, The $5 million investment helped our company to increase in value from $15 million to $20 million. This means that the venture capital's 20% stake in this company is worth $4 million.
The post-money valuation of a company determines its overall value and helps determine the potential for future funding rounds and acquisition offers. A high post-money valuation usually indicates strong investor interest and confidence in the company's growth potential.
Overall, post-money valuation is a key concept in the world of startup finance and is used to measure the value of a company after new investment has been made.
Common mistake
Using Post-Money Valuation as a label instead of a fact. If you cannot point to the evidence — a number, a customer, or a written assumption — you are using the word as jargon.
See also
SAFE
A YC-style agreement to invest now and receive equity later, usually at a priced round.
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Convertible note
A short-term loan that converts into equity at a later priced round.
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Term sheet
A non-binding outline of the deal: price, ownership, and the rights that matter.
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Cap table
The ledger of who owns the company: shares, options, and what converts later.
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