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. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  4. Investing News

    #1 Country For Tech Start-Ups: U.S.A

    U.S. tech companies are receiving increased levels of investor funding. In 2014, the number of mega-deals for such ventures doubled over the previous year.
  5. Entrepreneurship

    Go To College Or Become An Entrepreneur?

    The rising cost of higher education and high unemployment rate following the Great Recession has caused many young people to question the value of college.
  6. Entrepreneurship

    Best Checking Accounts For Small Businesses

    What you need to know to choose the best checking account for your small business – and where to look.
  7. Entrepreneurship

    How to Make Money with YouTube

    YouTube is the third most visited site in the world, and numerous people are making money thanks to the site's popularity. Here's how you can do it.
  8. Charts & Patterns

    How To Become A Private Equity Associate

    With the right planning, second- and third-year investment banking analysts can graduate to an associate position at a private equity firm.
  9. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...
  10. Investing

    What is Asset Management?

    In the investment world, asset management refers to active management of an investor’s portfolio by a financial services company – usually an investment bank.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center