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 >>
  3. How do I set up a Limited Liability Company (LLC)?

    The specific process and procedures for organizing a limited liability company (LLC) vary from state to state. However, the ... Read Full Answer >>
  4. How does the strength of the IPO market affect the drugs sector?

    The strength in the IPO market is an important indicator of liquidity, risk appetite and innovation in the drugs sector. ... Read Full Answer >>
  5. Why are some spin-offs taxable and some are tax-free?

    The manner in which a parent company structures the spinoff and divests itself of a subsidiary or division determines whether ... Read Full Answer >>
  6. If I retire in the Philippines, will I be able to work or start a small business?

    Foreign retirees entering the Philippines with plans to become permanent residents may start a business or work once they ... 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. Economics

    Explaining the Cash Budget

    A cash budget is a plan for the inflows and outflows of cash for a business or an individual.
  4. Entrepreneurship

    Can I Become An Angel Investor?

    Because of SEC rules, you already need significant assets to become an angel investor.
  5. Economics

    Tech Startup Momentum Being Generated In Detroit

    Rising from the ashes in the once proud auto-manufacturing City of Detroit is a rapidly emerging tech startup scene that could prove to be its salvation.
  6. Entrepreneurship

    The 10 Richest Women In Fashion

    The top 10 richest women in fashion have many similarities as well as differences. From nationality to career trajectory, these women have established themselves in their own unique ways.
  7. Entrepreneurship

    Should I Have An IPO on My Business

    The ultimate outside investment opportunity is going public through an initial public offering. However, IPOs come with costs that you may want to avoid.
  8. Entrepreneurship

    8 Fascinating Traits Billionaires Have In Common

    A top-notch education isn't enough to strike it rich. Nothing compares to learning the habits of the world's famous entrepreneurs and industry leaders.
  9. Entrepreneurship

    Why Small Business Owners Need Financial Advisors

    Small business owners are too busy to effectively manage their own money. That's why a financial advisor can be a big help.
  10. Entrepreneurship

    The 10 Richest Women In Tech & Media

    These 10 women are the wealthiest in tech and media.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center