Pre money and Post money Valuation

The startup world brings with it a whole new vocabulary of terms and jargons that startup owners need to be familiar with. If you are planning to raise capital, you would’ve probably heard the terms pre money and post money valuation.

As a startup founder these terms are very important in investor negotiations, so you should understand what they mean, and how they impact the financing of your company.

In this video, we are going to look at two of the most commonly used jargons in the startup world - Pre money and Post money valuation.

Pre-money valuation refers to the value of a company excluding the latest round of funding. Simply put, pre-money valuation evaluates the worth of the startup before it steps out to receive the next round of investment.

Post-money valuation, on the other hand, refers to the value of a company after it raises money and investment for itself. This includes outside financing or the latest rounds of funding.

The short answer to this question is that pre-money and post-money differ in the timing of valuation. Both pre-money and post-money are valuation measures of companies and are crucial in determining how much a company is worth.

Pre-money valuation refers to the value of a company not including external funding or the latest round of funding. Pre-money is best described as how much a startup might be worth before it begins to receive any investments into the company. This valuation doesn't just give investors an idea of the current value of the business, but it also provides the value of each issued share.

On the other hand, post-money refers to how much the company is worth after it receives the money and investments into it. Post-money valuation includes outside financing or the latest capital injection. It is important to know which is being referred to, as they are critical concepts in the valuation of any company.

It's very easy to determine the post-money valuation. To do so, use this formula:

Post-money valuation = Pre-money valuation + capital raised

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