Pre-money valuation is the value assigned to a company immediately before receiving new investment in a funding round. It is the most negotiated number in a priced round because it directly determines how much of the company investors receive. Post-money valuation equals pre-money plus the investment amount, and investor ownership equals their investment divided by the post-money valuation.
Pre-money valuation determines how much of the company investors get for their money. It is the single most negotiated number in a priced round.
Post-money = Pre-money + New money. The investor ownership percentage equals their investment divided by the post-money valuation.
Pre-seed: $2M-$6M pre-money. Seed: $5M-$15M. Series A: $15M-$40M. These vary widely by market, traction, and sector.
European valuations tend to run 20-40% below US equivalents at the same stage.
Pre-money $8M. Investor puts in $2M. Post-money = $10M. Investor owns $2M/$10M = 20%.
If the option pool is expanded pre-round (common ask), that dilution comes out of founders, effectively lowering the real pre-money.
Optimizing for highest valuation instead of best investor and terms. A high valuation sets a bar you must clear next round.
Not accounting for option pool expansion. A "$10M pre-money" with a 15% pool increase is effectively lower.
Confusing pre-money and post-money when comparing term sheets.
Ask slide: state the raise amount and target valuation range, or leave valuation open if you want competitive bids.
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