Pre-Money Valuation
The value of a company immediately before it receives external investment or financing.
Definition
Pre-money valuation represents what a company is worth before receiving new investment capital. It is used to determine what percentage of the company investors will receive for their investment and is a key negotiation point in funding rounds.
How to Calculate
Basic Formula:
Pre-Money Valuation = Post-Money Valuation - Investment Amount
Investor Ownership:
Investment Amount ÷ Post-Money Valuation = Ownership %
Real-World Example
Series A Example: Company valued at $20M pre-money receives $5M investment
Post-money valuation: $25M. Investor ownership: $5M ÷ $25M = 20%