The Core Formula
The relationship between these two numbers is a single equation:
Post-Money = Pre-Money + Investment Amount
From this, investor ownership percentage is:
# Investor percentage
Investor % = Investment Amount ÷ Post-Money Valuation
# Example: $1M into $4M pre
Post-money = $4M + $1M = $5M
Investor % = $1M ÷ $5M = 20%
# Example: $1M into $4M post
Pre-money = $4M - $1M = $3M
Investor % = $1M ÷ $4M = 25%
The investor who says “we value your company at $4M” without specifying pre or post is telling you something meaningful about how they negotiate.
The Same Raise, Very Different Outcomes
The table below shows how framing changes founder ownership across common scenarios. All examples use the same investment amount — only the valuation framing differs.
| Scenario | Pre-Money | Investment | Post-Money | Investor % | Founder % |
|---|---|---|---|---|---|
| $4M pre-money, $1M raise | $4,000,000 | $1,000,000 | $5,000,000 | 20.0% | 80.0% |
| $4M post-money, $1M raise | $3,000,000 | $1,000,000 | $4,000,000 | 25.0% | 75.0% |
| $5M pre-money, $1M raise | $5,000,000 | $1,000,000 | $6,000,000 | 16.7% | 83.3% |
| $5M post-money, $1M raise | $4,000,000 | $1,000,000 | $5,000,000 | 20.0% | 80.0% |
Same $1M investment. Founder ends up with between 75% and 83.3% depending on how valuation is framed.
SAFE and Convertible Note Complications
Simple Agreements for Future Equity (SAFEs) defer the valuation question — the exact price per share is not set until a priced round. This creates ambiguity about ownership percentage at signing, which is why the distinction between pre- and post-money SAFEs became a significant issue.
Y Combinator updated its standard SAFE to a post-money SAFE in 2018, and it has become the dominant format for UK and US seed-stage investing. Here is what distinguishes the two:
| Type | How It Converts | Founder Impact | Clarity |
|---|---|---|---|
| Pre-money SAFE (old YC standard) | Converts before new round shares are issued; dilutes founders and new investors proportionally | Moderate — SAFE holders dilute the existing cap table at conversion | Ambiguous — valuation cap does not define final ownership until conversion event |
| Post-money SAFE (current YC standard) | Ownership percentage is locked at the time of signing; new money does not dilute the SAFE | Higher initial dilution but fully predictable — founder knows exactly what they are giving up | Clear — founders know the exact post-money ownership percentage at signing |
Why Post-Money SAFEs Became the Y Combinator Standard
Before 2018, multiple SAFEs on a cap table created a compounding ambiguity problem. Each SAFE had a valuation cap, but because they converted pre-money, the order and amount of subsequent raises changed the ownership percentage each SAFE holder received. Founders could not predict dilution, and investors could not predict returns.
The post-money SAFE solved this with one rule: the percentage is locked at signing. A $500K SAFE at a $5M post-money cap gives the investor exactly 10% — regardless of how many other SAFEs are issued later, regardless of the size of the next round.
The trade-off is that founders feel more dilution immediately. Issuing four $500K SAFEs at $5M post-money locks in exactly 40% dilution at signing. That number is visible and unavoidable. With pre-money SAFEs, the same dilution was real but hidden — which felt better until the priced round revealed the true position.
Practical rule: If you are issuing SAFEs, use the YC post-money template. Your cap table is cleaner, your investors know what they own, and you know exactly how much of your company you have sold.
How to Communicate Clearly with Investors
Valuation ambiguity is not always malicious — sometimes founders and investors genuinely talk past each other. These habits eliminate the gap:
Always specify pre or post in writing
In emails, term sheets, and pitch decks: write "$5M pre-money valuation" or "$5M post-money valuation" — never just "$5M valuation". If a term sheet says "valuation of $5M" without qualification, ask for clarification in writing before signing anything.
Quote your own valuation in pre-money terms
In your pitch deck and verbal pitches, lead with your pre-money number. It is a higher number (for the same round), so it sounds better — and it is the industry convention that favours founders. Investors will convert it to post-money in their own models.
For SAFEs, quote the valuation cap clearly
State explicitly: "We are raising on a post-money SAFE with a $6M valuation cap." That one sentence tells the investor exactly what percentage they are buying and prevents the most common SAFE misunderstandings.
Verify your cap table reflects both scenarios
Before your first investor meeting, model your cap table at both pre- and post-money framing for your target raise. Know your dilution numbers cold. Investors will test you.
CapBrief
Model Both Scenarios in One Upload
CapBrief lets you toggle between pre-money and post-money framing on the same cap table upload. Upload your current equity structure, enter your target raise amount, and see exactly what both scenarios mean for every shareholder before you sit down with investors.
Try CapBrief Free →Frequently Asked
Is pre-money or post-money valuation better for founders?
Pre-money is almost always better for founders. At a given number, pre-money means investors receive a smaller percentage of equity for the same cheque size. A $1M raise at $4M pre gives investors 20%; the same raise at $4M post gives them 25%. Always clarify which one you are discussing with investors, and default to pre-money in your own pitch materials.
How do SAFEs affect my cap table?
SAFEs sit as a liability on your cap table — they do not appear as issued shares until they convert. On a fully diluted basis you must include the estimated conversion shares (calculated at the valuation cap, discounted if applicable). Post-money SAFEs are cleaner because the ownership percentage is locked; pre-money SAFEs require you to recalculate at every new round as the conversion share count changes.
What is a typical pre-money valuation for a seed round?
In the UK in 2024, pre-money seed valuations typically range from £1.5M to £8M depending on traction, team, and sector. SaaS companies with demonstrable MRR tend to get higher valuations. Pre-seed (pre-revenue) rounds often use SAFEs with a valuation cap of £1M–£3M rather than a priced round, which avoids the valuation negotiation until the seed round.
How does post-money valuation affect the option pool?
If you are creating or expanding an option pool as part of a round, the key question is whether the pool is created pre- or post-money. Investors typically require the pool to be created pre-investment — which means it dilutes founders, not investors. A 10% option pool carved out of the pre-money cap table at a $4M pre-money valuation actually reduces the effective pre-money valuation to $3.6M for founders. This is called the option pool shuffle.
Know Your Numbers
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