Pre-money and post-money valuations are financial concepts used in the private equity and venture capital industries to determine the value of a company during investment rounds.
Pre-Money Valuation: This is the valuation of a company prior to an investment or financing. If an investment adds cash to a company, the pre-money valuation refers to the enterprise value of the company before adding that cash. It is used to determine the equity stake a new investor will receive relative to the size of their investment.
Post-Money Valuation: This is the valuation of a company immediately after an investment or financing. It is calculated by adding the amount of the investment to the pre-money valuation of the company. The post-money valuation therefore reflects not just the value of the existing business, but also the impact of the new capital from the investor.
