Startup Dictionary
Pre-Money Valuation
Definition
The value of a company before an investment is made.
Deep Dive
Pre-money valuation refers to the value of a company *before* a new round of investment has been made. It is the valuation that founders and investors agree upon as the starting point for calculating how much equity a new investment will buy. This figure is a critical negotiation point, as it dictates the price per share for new investors and, consequently, the percentage of the company they will own after their capital infusion.
Examples & Use Cases
- 1A startup is valued at $10M before it receives any new funding
- 2Negotiating a $5M pre-money valuation with a venture capital firm
- 3An angel investor offers $500K for 10% equity, implying a $5M pre-money valuation.
Related Terms
Post-Money ValuationDue DiligenceTerm Sheet