Pre-money vs post-money valuation, explained in 60 seconds

An investor offers £1m at a £4m valuation. How much of your company did you sell? It depends on one word.

If £4m is pre-money: the company is worth £5m after the cash. Investor owns 1 ÷ 5 = 20%.

If £4m is post-money: the cash is already counted. Investor owns 1 ÷ 4 = 25%.

The rule: investment ÷ post-money valuation = investor's share.

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