Pre- Money Valuation – Pre-money valuation is the value of a firm before any outside capital in most recent/proposed round of funding has been added. Pre-money is best defined as the potential value of a start-up before it starts to receive outside funding. This valuation not only provides investors with a sense of the current worth of the company, but also the value of each share that has been issued. Post-money, on the other hand, refers to the company’s value following the receipt of funding and subsequent investments.
Post-money valuation takes into account recent capital infusions or external finance. Knowing which one is being discussed is crucial because they are key ideas in valuing any firm.
Pre-Money should be used to evaluate “What is the business being valued at?”. From the founder’s perspective, this portrays “How much value have I built till now against which I’m getting this investment”. Post Money is useful to calculate “What % will I get in the new firm”. A ₹1 Crore round at ₹10 Crore Post-Money gives an easy calculation that the Investor will have 10% and the founder will retain 90%
