Post-Money Valuation

AAA

DEFINITION of 'Post-Money Valuation'

A company's value after outside financing and/or capital injections are added to its balance sheet. Post-money valuation refers to a company's valuation after funds, such as investments from venture capitalists or angel investors have been added to the balance sheet. Valuations that are calculated before these funds are added are called pre-money valuations. The post-money valuation, then, is equal to the pre-money valuation plus the amount of any new equity received from outside sources such as investors.

INVESTOPEDIA EXPLAINS 'Post-Money Valuation'

Investors such as venture capitalists and angel investors use pre-money valuations to determine the amount of equity they need to secure in exchange for any capital injection. For example, assume a company has a $100 million pre-money valuation. A venture capitalist puts $25 million into the company, creating a post-money valuation of $125 million (the $100 million pre-money valuation plus the investor's $25 million). In a very basic scenario, the investor would then have a 20% interest in the company, since $25 million is equal to one-fifth of the post-money valuation of $125 million.

RELATED TERMS
  1. Equity Financing

    The act of raising money for company activities by selling common ...
  2. Smart Money

    Cash invested or wagered by those considered to be experienced, ...
  3. Venture Capitalist

    An investor who either provides capital to startup ventures or ...
  4. Pre-Money Valuation

    A slang phrased that refers to the value of a company's stock ...
  5. Project Finance

    Defined by the International Project Finance Association (IPFA) ...
  6. Angel Investor

    An investor who provides financial backing for small startups ...
Related Articles
  1. Cashing In On The Venture Capital Cycle
    Fundamental Analysis

    Cashing In On The Venture Capital Cycle

  2. Georges Doriot And The Birth Of Venture ...
    Investing

    Georges Doriot And The Birth Of Venture ...

  3. Seek An Adventure In Venture Capital
    Personal Finance

    Seek An Adventure In Venture Capital

  4. What's the difference between pre-money ...
    Entrepreneurship

    What's the difference between pre-money ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center