Glossary · Equity and dilution · Updated 28 August 2026
Pre-money valuation is what the company is worth before the round's money arrives; post-money is that same value plus the amount raised. The formula is direct — post-money = pre-money + amount raised — and an investor's stake is always computed against the post-money figure.
Confusing the two is the most common and most expensive misunderstanding in fundraising conversations. Saying "we are raising €1M at €4M" is ambiguous: depending on whether that €4M is pre or post, the investor gets 20% or 25%. Five points of difference behind an identical headline.
One technical detail is routinely missed: the option pool. When the term sheet creates the pool pre-money, it comes out of the announced pre-money valuation. A €4M pre-money with a 10% pool is really €3.6M attributed to the founders, with the rest being a pool they fund alone.
For scale, PitchBook put the median European seed valuation at €5.6M in Q1 2025, on a median round of €2.2M. These figures vary widely by sector and geography, and are a reference point rather than a benchmark.
Example: one number, two outcomes
A startup raises €1M. The investor proposes "a €4M valuation". Here are the two possible readings.
| Reading 1 — €4M pre-money | Post-money = €4M + €1M = €5M |
|---|---|
| → Investor stake | €1M / €5M = 20% |
| → Founder stake | 80% |
| Reading 2 — €4M post-money | Pre-money = €4M − €1M = €3M |
| → Investor stake | €1M / €4M = 25% |
| → Founder stake | 75% |
| Gap | 5 points of equity behind an identical number |
On a €50M exit those 5 points are worth €2.5M. Which is why the first question to ask about any quoted valuation is always: pre or post?
The common mistake
Accepting a flattering pre-money paired with a large pre-money option pool. The two offset each other, and the valuation actually attributed to founders can end up below a competing offer with a lower headline number.
Frequently asked questions
How do you calculate an investor's stake?+
Stake = amount invested ÷ post-money valuation. With €1M invested at a €5M post-money, the investor holds 20%. Using pre-money in the denominator is the most common arithmetic error and systematically overstates what founders keep.
What valuation should you target at European seed?+
PitchBook put the European median at a €5.6M valuation on a €2.2M median seed in Q1 2025. But an inflated seed valuation creates down-round risk at Series A, which costs far more than an extra point of dilution up front.
Sources
Related terms
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