What is pre- and post-money participation?

Pre and post money equity is the percentage of ownership an investor has in a company before and after making an investment. Pre and post money participation depends on the pre and post money valuation of the company, which is the estimated value it has before and after receiving the capital contributed by the investor.

• Pre-money participation = (Pre-money valuation / Total number of shares) x Number of shares of the investor
• Post-money stake = (Post-money valuation / Total number of shares) x Number of investor shares

It is essential for investors and entrepreneurs as it allows them to understand how much property they are getting or giving up after a round of financing.

Related concepts

• Social capital
• Stakes
• Shares
• Residual price