In August, Form Energy closed a $750 million funding round, and media outlets differed in their valuations: some reported $1.75 billion, while others cited "over $2 billion." Both figures are correct. They represent valuations for the same round—one calculated before the new capital was injected and the other after.
"Pre-money" refers to the company's value prior to the round; this is the valuation at which new investors purchase a stake in the existing business. "Post-money" is the value immediately following the round—the pre-money valuation plus the newly raised capital. For Form Energy, these figures were $1.75 billion and $750 million, respectively, resulting in a post-money valuation of approximately $2.5 billion.
What this means for the investor
1️⃣ The new investors' stake is calculated by dividing the round amount by the post-money valuation. Participants in the Form Energy round acquired roughly 30% of the company: $750 million out of $2.5 billion.
2️⃣ Dilution. To accommodate new capital, the company issues new shares, causing the stakes held by existing shareholders to decrease proportionally. Following the Form Energy round, each existing shareholder held a stake 30% smaller than before. This does not constitute a loss: if the pre-money valuation exceeds the previous valuation, the smaller stake is worth more than the larger stake held prior to the round.
3️⃣ Comparing rounds. The most accurate benchmark is the price per share. If this figure is not disclosed, the new round's pre-money valuation is compared to the previous round's post-money valuation—representing the business's value immediately after the prior capital injection. The new post-money figure is unsuitable for this comparison because it already includes the fresh capital.
4️⃣ Which figure is cited. Company press releases and most news reports cite the post-money valuation. Reports on negotiations more frequently cite the pre-money valuation—as was the case recently with Lambda: a $14.5 billion pre-money valuation combined with a round of up to $4 billion implies a post-money valuation of up to $18.5 billion, assuming the round is fully subscribed.