Pre-money valuation
From Wikipedia, the free encyclopedia
A pre-money valuation is a term used in private equity or venture capital that refers to the valuation of a company or asset prior to an investment or financing.
External investors, such as venture capitalists and angel investors will use a pre-money valuation to determine how much equity to demand in return for their cash injection to an entrepreneur and his or her startup company. This is calculated on a fully diluted basis.
[edit] Example
For example, if an investor makes a $10 million investment into a company in return for 20% of the company's equity, the implied post-money valuation is $50 million. To calculate the pre-money valuation, the amount of the investment is subtracted from the post-money valuation. In this case, the implied pre-money valuation is $40 million.
[edit] See also
|
||||||||||||||||||||||||||||||||||
