Pre-Money Valuation
The agreed value of a company immediately before new investment capital is added.
Pre-money valuation is the price tag put on the company as it exists before a new round's cash arrives. It is set through negotiation between founders and the lead investor, based on traction, market size, comparable deals, and how much competitive tension exists for the round.
Pre-money and post-money valuation are directly linked: post-money valuation always equals pre-money valuation plus the amount of new money raised. Confusing the two is the most common source of founder math errors during term sheet negotiations, since a single headline number is often quoted ambiguously.
Post-money valuation = pre-money valuation + amount raisedA company negotiates an $18M pre-money valuation and raises $4.5M. Post-money valuation is $22.5M, and the new investors own $4.5M / $22.5M = 20% of the company.
Always ask explicitly whether a quoted valuation is pre- or post-money, and whether it includes the new option pool — those two clarifications alone can shift real founder ownership by five or more percentage points on an identical headline number.
Is pre-money valuation before or after the new investment?
Before — it's the company's agreed value before the new round's cash is added; post-money is the value after.
Does pre-money valuation include the option pool?
Almost always yes in US venture deals — investors typically require the new or expanded option pool to be created inside the pre-money valuation, which dilutes founders more than dilutes investors.
Related terms
Run the numbers yourself: dilution, SAFE conversion, and fund-returner calculators.