Pre-Money Valuation

AAA

DEFINITION of 'Pre-Money Valuation'

A slang phrased that refers to the value of a company's stock before it goes public. The term is often used by venture capitalists.

Also known as "pre-money."

INVESTOPEDIA EXPLAINS 'Pre-Money Valuation'

For example let's say Jim's Fabless Donut Shop is thinking of going public. If management and venture capitalists estimate the company will raise $100 million in the IPO, it is said to have $100 million in pre-money.

Valuing a company's stock before it goes public is a difficult task. When venture capitalists and entrepreneurs talk about pre-money they have to be very careful not to fall into the trap of "counting their chickens before the eggs have hatched" or, in other words, spending money they don't actually have.

RELATED TERMS
  1. Equity Financing

    The act of raising money for company activities by selling common ...
  2. Asset-Based Approach

    A type of business valuation that focuses on a company's net ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously ...
  4. Zero Prepayment Assumption

    The supposition that scheduled principal and interest will be ...
  5. Business Valuation

    The process of determining the economic value of a business or ...
  6. Valuation

    The process of determining the current worth of an asset or company. ...
RELATED FAQS
  1. What's the difference between pre-money and post-money?

    The short answer to the question is that they differ in timing of valuation. Both pre-money and post-money are valuation ... Read Full Answer >>
  2. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ... Read Full Answer >>
Related Articles
  1. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  2. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  3. Retirement

    How (And Why) To Open an IRA Now

    Take these simple steps to set up an Individual Retirement Account that will save you tax money and set you up for the future.
  4. Investing

    What Tech Companies Seeking Funding Must Overcome

    Tech companies face a unique set of challenges, including a need for timely responses to changes in technology and difficulty recruiting the right talent.
  5. Investing

    Crowdfunding: Wide Opening For Tech Investors

    Crowdfunding has dramatically changed investing and opened the door for the public to get in on all types of exciting startups, including tech firms.
  6. Entrepreneurship

    Taboola: How "Content You May Like" Makes Money

    Taboola's tagline, “content you may like,” conveys a lot about its business philosophy.
  7. Entrepreneurship

    5 Small Business Ideas With Big Potential

    Here are five businesses almost anyone can start their own and grow as they gain experience.
  8. Entrepreneurship

    Emerging Startup Cities Of 2015

    While Silicon Valley and New York have been the birthplace of several well-known startups, other U.S. cities are making names for themselves as tech hubs.
  9. Entrepreneurship

    The Importance of Excel in Business

    Microsoft Excel is an indispensable tool for any business.
  10. Investing Basics

    Social Media: High Risk, High Potential Returns

    Carefully selecting social media ETFs can provide you with the opportunity to diversify your portfolio and enjoy financial rewards due to user growth.

You May Also Like

Hot Definitions
  1. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  2. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  3. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  4. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  5. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  6. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
Trading Center