Pre Money and Post Money Valuation

Pre-Money and Post-Money Valuation

Start-up Founders work towards goal of creating long-term, profitable growth when it comes to building businesses. Whatever be the stage of a start-up, obtaining financing is a necessity. For the same, most founders find it feasible to get seed funding through investors.

Taking investments from angel investors or venture capitalists (VCs) means you need to get familiar with how much your company is valued at, which happens in two different stages: a pre-money and post-money valuation. The main difference between the two is the stage of the funding process you’re in—pre-money valuation occurs before raising external funds while post-money takes place immediately after the investments.

Pre-Money and Post-Money Valuation
A pre-money valuation refers to worth of your company is before receiving funding. The Post-Money valuation is the value of your company after receiving funding.
 
Pre-Money and Post-Money Valuation calculation:
 
Pre-Money valuation:
 
Funding
 
Post-Money valuation
 
% of Investor
 
$20m
 
$10m
 
$20m + $10m = $30m
 
$10m/$30m = 33.33%
 
 
 
As a investor, if you invest $10m in your Company at a post money valuation of $30m, your equity stake in the Company is 33.33%.
 
The valuation is usually determined consideration of various factors including those impacted by current and future profitability of the companies being assessed, business operations and prospective business contracts with the companies.

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