Pre-money valuation is the agreed value of a company immediately before a new investment round closes. Post-money valuation is the pre-money plus the amount raised in that round. The new investor's ownership percentage is calculated as their investment divided by the post-money valuation, and the entire round economics flow from these two numbers and a small set of related mechanics (option pool placement, convertible conversion, anti-dilution adjustments).
The math is straightforward, and the difference is exactly the round itself:
| Term sheet language | Pre-money | Investment | Post-money | New investor ownership |
|---|---|---|---|---|
| "$5M at $20M pre-money" | $20M | $5M | $25M | 20% ($5M/$25M) |
| "$5M at $25M post-money" | $20M | $5M | $25M | 2... |