Intro.
#Pre-Money / Post-Money Valuation — Company Value Before and After Investment
This is where every valuation negotiation starts. Pre-money is your company's value 'right before' receiving investment; post-money is your company's value 'right after' the investment lands. The relationship between the two is simple: post-money = pre-money + investment amount.
| Term | How to Read It | Definition |
|---|
| pre-money | pre-money | Company value right before investment (excludes the investment amount) |
| post-money | post-money | Company value right after investment (includes the investment amount) |
| Ownership percentage | Investment amount ÷ post-money | The percentage of new shares the investor receives |
Example — if a company with a ₩2B pre-money valuation raises ₩500M, the post-money valuation is ₩2.5B. The investor's ownership stake is ₩500M ÷ ₩2.5B = 20%. A common mistake founders make is calculating it as '₩500M into a ₩2B company = 5/20 = 25%.' The denominator for ownership percentage is always post-money.
주의
If a negotiation just states 'valuation: ₩2B,' always confirm whether that's pre- or post-money. Even with an identical number, a ₩2B pre-money valuation and a ₩2B post-money valuation produce very different founder ownership.
02
#TAM/SAM/SOM — How to Read the 3 Tiers of Market Size
This is a 3-tier framework for narrowing market size from largest to smallest. Read them as 'tam,' 'sam,' and 'som.' As you move from top to bottom, the market narrows to something increasingly realistic — 'what I can actually capture.'
| Term | How to Read It | Meaning |
|---|
| TAM | Total Addressable Market | The entire market — if you captured all of it, with no constraints |
| SAM | Serviceable Available Market | The market your product and geography can actually reach |
| SOM | Serviceable Obtainable Market | The realistic share you're targeting to capture in your first few years |
Example — for a domestic tax-filing SaaS product built for small business owners, TAM would be 'the global accounting-software market for SMBs,' SAM would be 'the domestic tax software market for small business owners,' and SOM would be 'the share we can realistically capture domestically within 3 years.' What reviewers and VCs care about most isn't TAM — it's the basis behind your SOM.
TIP
Cite a huge TAM with no SOM justification, and you'll get docked for 'TAM inflation.' SOM needs to be calculated bottom-up (see #6 below) to earn credibility.
03
#FPF (Founder-Problem Fit) — How Well the Founder Fits the Problem
FPF stands for 'Founder-Problem Fit' — essentially, 'why are you the right person to solve this problem.' It's a concept that precedes PMF (Product-Market Fit): before asking whether the product fits the market, it asks whether the founder fits the problem. It's the central lens investors use to judge a team at the pre-seed and early stages.
- Why this problem — has the founder personally experienced it, or do they deeply understand it?
- Why now — what shift in market or technology makes this solvable now?
- Why you — what unique experience, network, or expertise makes you the one to solve it?
TIP
Strong FPF gets you funded even when the product is still rough. Weak FPF makes you look like 'anyone could build this,' which makes early investment hard to secure. The problem-definition section of a business plan is, in effect, where you prove FPF.
04
#Convertible Preferred Stock (RCPS) and the MFN Clause
The standard investment instrument in Korean startup deals is convertible preferred stock — more precisely, RCPS (Redeemable Convertible Preferred Stock). It's preferred stock that carries both a right to convert into common stock (conversion right) and a right to demand repayment of principal (redemption right). The structure lets investors hedge their downside through redemption while capturing upside through conversion.
| Term | How to Read It | Core Idea |
|---|
| RCPS | Redeemable Convertible Preferred Stock | Preferred stock with both redemption and conversion rights (Korea's standard) |
| Conversion right | — | The right to convert into common stock (upside) |
| Redemption right | — | The right to get principal plus interest back (downside protection) |
| MFN | Most Favored Nation clause | If a later investor gets better terms, existing investors automatically get those terms too |
An MFN (Most Favored Nation) clause is a promise that 'if any other investor in this round or a future round gets more favorable terms, those same terms automatically extend to existing investors.' It shows up especially often in SAFEs and convertible notes. For founders, a concession made to one investor can spread across the entire round, so you need to check exactly what the clause covers — price, liquidation preference, consent rights, and so on.
주의
Clauses like MFN, liquidation preference, and consent rights can each single-handedly reshape the economics of an entire round. Review them clause by clause before signing a term sheet. (Contract enforceability should always be reviewed by a qualified professional.)
05
#Funding Round Classifications — Seed, Pre-A, Series A and Beyond
Rounds are categorized by a company's maturity and what the capital is meant to prove. Since absolute dollar amounts shift with market conditions, it's more accurate to think in terms of 'what stage has this company proven,' not the amount raised.
| Round | What You Need to Prove | Typical Purpose |
|---|
| Pre-Seed | FPF — fit between founder and problem | MVP and early validation |
| Seed | Early signs of PMF, real users | Finishing the product, entering the market |
| Pre-A | Early growth-stage traction | A bridge to Series A |
| Series A | A repeatable growth formula (PMF) | Scaling and expanding the org |
| Series B+ | Unit economics, market share | Full-scale expansion, going international |
TIP
Rounds are defined not by 'how much you raised' but by 'what you proved.' The same ₩500M could be a Series A if PMF is proven, or still a seed round if it's not yet validated.
06
#Bottom-Up vs. Top-Down Revenue Estimates
These are the two directions for calculating revenue or market size. Top-down works down from 'what % of a big market,' while bottom-up builds up from 'customer count × price × frequency.' Reviewers and VCs trust bottom-up.
| Approach | Calculation Direction | Example |
|---|
| Top-Down | Total market × market share % | 1% of a ₩10T market = ₩100B (weak justification) |
| Bottom-Up | Customer count × price × purchase frequency | 10,000 customers × ₩30,000/month × 12 months = ₩3.6B (strong justification) |
Top-down conveys a sense that 'the market is big,' but it can't explain why you'd capture that specific percentage. Bottom-up is built from verifiable variables — customer acquisition path, price, conversion rate — so it holds up under questioning. Always calculate SOM bottom-up.
07
#Quick Reference for Commonly Confused Basic Terms
| Term | How to Read It | One-Line Definition |
|---|
| co-founder | co-founder | A person who founded the company together, splitting equity and roles |
| cap table | cap table | A table showing every shareholder's ownership |
| dilution | dilution | The reduction in existing shareholders' ownership when new shares are issued |
| runway | runway | The number of months your current cash can sustain the company |
| burn rate | burn rate | Monthly net cash outflow |
| dry powder | dry powder | Capital a VC has raised but not yet deployed |
| lead investor | lead investor | The investor who leads the round and sets its terms |
TIP
Using terms precisely is itself a signal of credibility. Mix up pre- and post-money, or confuse TAM with SOM, in an IR meeting, and you read as 'an unprepared team' regardless of your actual content.
Summary.
#Once You Know the Terms, the Next Question Is 'Do My Numbers Hold Up?'
Knowing investment terminology accurately is just the starting point. The real evaluation comes down to: 'Is your valuation justified? Does your SOM hold up as a bottom-up calculation? Is FPF actually proven in your problem definition?' Use the right terms with weak number logic, and you'll get stuck in the same place.
CTA
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