Pre-Money vs Post-Money: What Founders Get Wrong

Pre-money and post-money are the two ways valuation gets expressed — and confusing them is surprisingly common, even in signed term sheets.

Pre-money valuation is what your company is worth before the new investment. Post-money is after: Pre-Money + Investment = Post-Money.

The equity stake an investor receives = Investment ÷ Post-Money Valuation.

The Example That Makes It Concrete

An investor agrees to invest INR 5Cr at a valuation of INR 20Cr. Whether that INR 20Cr is pre or post-money changes the deal:

• If INR 20Cr is pre-money: Post-money = INR 25Cr. Investor gets 5/25 = 20%.
• If INR 20Cr is post-money: Pre-money = INR 15Cr. Investor gets 5/20 = 25%.

A 5% ownership difference at seed compounds significantly by Series B. Always confirm in writing which valuation the term sheet references.

The Option Pool Complication

Investors often require an ESOP pool created before their investment is counted — pre-money. This means founders bear the dilution before the investor's stake is calculated.

If you agree to a 15% pre-money ESOP pool on a INR 20Cr pre-money valuation, founders are already diluted 15% before the investor comes in. Model this explicitly before agreeing to pool size and timing.

Evolv's Recommendations

• Confirm in writing whether every valuation figure is pre or post-money.
• Model the ESOP pool impact separately.
• Research typical valuations for your stage and sector before negotiations.
• Don't negotiate valuation in isolation — a higher valuation with participating preferences can be worse than a lower valuation with clean non-participating terms.

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