Pre-Money Valuation

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."

BREAKING DOWN '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.

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