what is the post money valuation 
post money valuation is a company s estimated worth after outside financing and or capital injections are added to its balance sheet post money valuation refers to the approximate market value given to a start up after a round of financing from venture capitalists or angel investors have been completed valuations that are calculated before these funds are added are called pre money valuations the post money valuation is equal to the pre money valuation plus the amount of any new equity received from outside investors understanding post money valuationinvestors such as venture capitalists and angel investors use pre money valuations to determine the amount of equity they need to secure in exchange for any capital injection for example assume a company has a 100 million pre money valuation a venture capitalist puts 25 million into the company creating a post money valuation of 125 million the 100 million pre money valuation plus the investor s 25 million in a very basic scenario the investor would then have a 20 interest in the company since 25 million is equal to one fifth of the post money valuation of 125 million the scenario above assumes that the venture capitalist and the entrepreneur are in total agreement about the pre and post money valuations in reality there is a lot of negotiation particularly when companies are small with relatively little in the way of assets or intellectual property as private companies grow they are better able to dictate the terms of their financing round valuations but not all companies reach this point importance of post money valuation to financing roundsin subsequent rounds of financing of a growing private company dilution becomes an issue careful founders and early investors to the extent possible will take care in negotiating terms that balance new equity with acceptable dilution levels additional equity raises may involve liquidation preferences from preferred stock other types of financing such as warrants convertible notes and stock options must be considered if applicable in dilution calculations in a new equity raise if the pre money valuation is greater than the last post money valuation it is called an up round a down round is the opposite when pre money valuation is lower than post money valuation founders and existing investors are finely attuned to up and down round scenarios this is because financing in a down round usually results in dilution for existing investors in real terms as a result financing in a down round is often seen as somewhat desperate on the part of the company financing in an up round however there is less reluctance as the company is seen as growing towards the future valuation it will hold on the open market when it eventually goes public there is also a situation called a flat round where the pre money valuation for the round and the post money valuation of the previous round are roughly equal as with a down round venture capitalists usually prefer to see signs of an increasing valuation before putting in more money for related reading see pre money vs post money what s the difference 