How valuation works: pre-money vs. post-money valuation

The price per share and pre-money valuation run in the same direction (i.e., if one goes up, so does the other). Example:XYZ Venture Capital plans to invest $2.5 million into ABC & Co. based on a pre-money valuation of $10 million. The post-money valuation is simply the pre-money valuation plus the contemplated aggregate investment amount. In this example, the pre-money valuation ($10M) is combined with the VC investment ($2.5 million) to arrive at the post-money valuation of $12.5M. Most term sheets tend to employ pre-money valuations more than post-money valuations (sometimes both).