Post Money Valuation
Key Highlights
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Post money valuation is what a company is worth right after it gets new investment money.
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It is calculated by adding the investment amount to the pre-money valuation, which is the company’s value before the investment.
What is Post Money Valuation?
Post money valuation is what a company is worth right after it gets new investment money.
How It’s Calculated?
It is calculated by adding the investment amount to the pre-money valuation, which is the company’s value before the investment.
Example
If a company is valued at $10 million before investment and gets $2 million in new funds, its post money valuation is $12 million.
Importance in Startup Funding and Ownership
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Determining Ownership: It shows how much of the company new investors get for their money.
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Negotiation Tool: Founders and investors use it to decide how much company ownership is traded for cash.
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Shows Growth Potential: A higher valuation suggests investors believe the company has a bright future.
Impact on Future Funding and Dilution
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Future Rounds: The post money valuation from one round sets the starting point for the next round’s value.
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Dilution Risk: New shares can shrink existing owners’ slices of the company, so managing valuation is key to balancing cash needs and ownership.
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Up Rounds Vs Down Rounds: An “up round” (higher valuation next time) is a good sign. A “down round” (lower valuation) might mean trouble and lead to bigger ownership losses for current shareholders.