A pre-money or post-money valuation is not a statement about what one share is worth. It is a price per share, multiplied by a share count, and that share count is usually fully diluted, meaning it commonly includes every option granted, the option pool set aside for future grants whether or not it has been allocated, and any SAFE or note as if already converted, alongside the ordinary and preference shares on issue, although each term sheet defines its own list of what counts. Because two rounds can define "fully diluted" slightly differently, the same headline pre-money figure can imply a different price for every existing share. The figure prices the round's own instrument at a point in time against an assumed share count. The ATO has not published a rule treating it as the market value of an ordinary share 1, 2, 3. This guide is published by Start-Up Valuations, a division of Valuation Group, for Australian founders, directors and advisers.
Last updated 28 September 2026
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What do pre-money and post-money actually mean?
- Pre-money valuation
The round price per share multiplied by the fully diluted share count just before the new investor's shares are added. It is a negotiated figure for the company's equity implied by the round price, not a valuation of the business or of any one class of share.
- Post-money valuation
Pre-money valuation plus the new money actually invested. The same price per share prices both figures; only the share count changes between them.
- Option pool
Shares reserved for future grants to employees, contractors or advisers, whether or not anyone has actually been granted an option yet. An unallocated pool is often counted in the fully diluted share count, though the treatment varies by term sheet.
- SAFE or convertible note, as-converted
A SAFE (a simple agreement for future equity) or a convertible note is an agreement to issue shares later, on terms set now, usually a valuation cap, a discount, or both. "As-converted" means the instrument is added to the fully diluted share count as if it had already turned into shares at this round. How a cap and a discount interact is covered in our guide to SAFEs and convertible notes; this page only needs the fact that, once converted, those shares join the same fully diluted count everything else is measured against.
What can "fully diluted" include, and why does the list matter?
What a fully diluted share count commonly includes
- Ordinary shares actually on issue
- Preference shares actually on issue, of every class from every prior round
- Options granted and not yet exercised, whether vested or unvested
- The unallocated option pool, meaning shares set aside for future grants that have not yet been promised to anyone
- Warrants on issue
- SAFEs and convertible notes, converted at this round using their own cap, discount or other conversion terms
Two rounds that both say "on a fully diluted basis" can still mean different things by it. One term sheet might count only the pool already allocated to named employees; another might count the full pool the board has approved, allocated or not. One might convert every outstanding SAFE at this round; another might leave one that has not yet hit its trigger out of the count entirely. Neither approach is wrong on its face; what matters is that the fully diluted count actually used is the one written into the term sheet's own cap table, not assumed from the headline number.
What is the option pool shuffle?
In our view, this is the mechanic most likely to catch a founder by surprise, because it happens inside a number that looks unchanged. In our experience, an investor negotiating a round may ask for the option pool to be sized to a stated share of the fully diluted cap table after the round, and for the top-up needed to reach it to be created before the pre-money valuation is set. Because the pool is created pre-money, its cost falls on the shareholders who exist before the round, mainly the founders, not on the incoming investor, whose own shares are only counted once the pool is already in place.
The headline pre-money figure can therefore stay exactly the same while the price per share, and the percentage the founders end up holding, both move, because the fully diluted count it is divided across has grown. Comparing two term sheets on the pre-money number alone, without checking how large a pool each assumes and where it sits, can mean comparing two different deals that happen to share one number. Whether a given pool size is reasonable is a negotiating question between the company and the investor, not one this page answers in general terms; the worked example below shows the mechanism, not a recommended size.
Why can two term sheets with the same headline pre-money price shares differently?
Because the pre-money figure is a numerator, not an answer on its own. Price per share is pre-money valuation divided by the fully diluted share count assumed at that point, so the same numerator produces a different price whenever the denominator differs. Three assumptions commonly drive that difference between otherwise similar term sheets.
Assumptions that change the price per share behind an identical headline pre-money figure
- The size of the option pool top-up, and whether it sits pre-money or post-money
- Whether outstanding SAFEs or notes are converted into the pre-money count or left outstanding for now
- Whether the count includes every option granted, or only the ones already vested
The worked example below shows one company, one pre-money figure, and two different fully diluted assumptions producing two different prices per share for the existing shares.
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What does this look like on a cap table?
Illustrative. Fictional numbers.
Fictional numbers. Not market evidence.
(Fictional numbers. Not market evidence.)
Working out price per share from a headline pre-money figure
Fictional numbers. Not market evidence.
Nimbus Fictional Pty Ltd, a fictional company and not a client, agrees a headline pre-money valuation of $9,000,000 with a new investor for a Series A round. Before this round, the register shows 6,000,000 founder ordinary shares, 1,000,000 seed preference shares, and a 200,000 share unallocated option pool. A SAFE holder is owed shares on conversion, and the new investor asks for two things inside the pre-money number: the SAFE converts, and the pool is topped up to 1,200,000 shares.
The SAFE converts into 800,000 shares under its own cap. Adding the founders' 6,000,000, the seed investors' 1,000,000, the enlarged pool's 1,200,000 and the converted SAFE's 800,000 gives a pre-money fully diluted count of 9,000,000 shares.
Price per share is the $9,000,000 pre-money figure divided by that 9,000,000 share count: $1.00 per share. The new investor puts in $3,000,000 at that price for 3,000,000 Series A preference shares. Post-money valuation is $9,000,000 plus $3,000,000, or $12,000,000, which also equals $1.00 multiplied by the new 12,000,000 share fully diluted total.
Before any of this, the founders held 6,000,000 of the 7,200,000 shares and pool then on the register, close to 83 per cent of shares and pool on issue, before counting the SAFE. Counting the SAFE's 800,000 shares on an as-converted basis alongside that register gives 6,000,000 of 8,000,000, or 75 per cent. After the SAFE conversion, the pool top-up and the new investment, all counted inside the same $9,000,000 pre-money figure, the founders still hold 6,000,000 shares, but out of 12,000,000, exactly half. Two of those three changes, the SAFE conversion and the pool top-up, brought no new money in at this round (the SAFE money was paid earlier). Only the third did, and the headline pre-money number does not show that split.
Now compare a second term sheet offering the identical $9,000,000 headline figure, but assuming the pool tops up to only 700,000 shares, with everything else the same. The pre-money fully diluted count becomes 8,500,000 shares (6,000,000 plus 1,000,000 plus 700,000 plus 800,000), so price per share is $9,000,000 divided by 8,500,000, or close to $1.06. Same headline pre-money figure, two different prices for every existing share, because the fully diluted assumption behind the number differed.
Why does this matter beyond the term sheet?
A capital raise valuation prepared for the company or its board checks these same mechanics, treating the fully diluted count as something to be built and checked, not read off a summary slide; our capital raise valuations page sets out how that engagement is scoped. Where preference shares carry rights ordinary shares do not, the price agreed for the priced class is a further step removed from the value of an ordinary share, covered in our guide to ordinary shares and preference shares. Once a SAFE or note has actually converted, the shares it produces sit in the fully diluted count exactly as shown above; the mechanics are in our guide to SAFEs and convertible notes.
A separate question this page does not attempt to answer is whether a round price of this kind can stand in for the market value of an ordinary share for another purpose, such as an employee share scheme valuation or a tax position. The ATO has not published a rule that treats a funding round price as the market value of a company's ordinary shares, although it lists a valuation prepared for capital raising as one possible alternative method 1, 2, 3; that reasoning is set out in full in our guide to a recent capital raise as valuation evidence and our guide to how ESS valuations work.
What mistakes come up most often?
Common mistakes with pre-money and post-money figures
- Comparing two term sheets' headline pre-money numbers without checking what each fully diluted share count actually includes
- Treating an unallocated option pool as belonging to nobody, when a pre-money pool top-up has its cost fall on the existing shareholders
- Leaving a SAFE or note out of the share count because it has not converted yet, then being surprised by the dilution once it does
- Assuming the post-money figure is the value of every share, including ordinary shares, when the round priced a preference class
- Assuming a headline figure is itself a market value opinion suitable for another purpose, such as an ESS grant or a tax position, without further work 2, 3
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Frequently asked questions
Is post-money valuation just pre-money plus the amount raised?
Usually, where "amount raised" means new primary money paid for new shares. Check whether the term sheet counts converting SAFEs or notes within that amount, and whether a secondary sale sits inside the round, since a secondary sale adds no new money to the company. The price per share itself stays the same across both figures; what changes is the fully diluted share count.
Does the option pool dilute the founders or the new investor?
It depends on where the term sheet places it. A pool created or topped up inside the pre-money number dilutes the shareholders who exist before the round, mainly the founders. A pool sitting on top of the post-money number instead dilutes everyone, including the new investor, in proportion to their holding. Read the term sheet's own definition; do not assume either treatment.
Can I use our post-money valuation as the value of our ordinary shares for an ESS grant or a tax position?
No, not on its own. See our guide on a recent capital raise as valuation evidence for why, and our guide to how ESS valuations work for what an ESS valuation needs to cover.
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Sources (3)
- ESS, Safe-harbour valuation methods. Australian Taxation Office. Last updated 1 October 2025; QC45990. Accessed 27 Sep 2026. S002 ab
- Market valuation for tax purposes (Guide). Australian Taxation Office. Current at February 2025. Accessed 27 Sep 2026. S009 abc
- Market value (ESS in detail hub). Australian Taxation Office. QC82046 (no date shown). Accessed 27 Sep 2026. S010 abc