investment
Pre-money valuation is the agreed value of a company’s equity immediately before new money in a priced round. It is a deal price for the round, not an independent appraisal of the firm.
Pre-money valuation is the number in the term sheet that, plus the new cash (and sometimes plus the convertible conversion), produces post-money valuation. Ownership for new investors is roughly new money ÷ post-money. NVCA-style deals then fight over whether the option pool is carved from pre-money (founder-dilutive) or post-money.
This is not fair value under IFRS 13 or IPEV, and it is not enterprise value from a control DCF. It can be informed by those methods. It is still a negotiated price.
Pre-money €16m, raise €4m, no pool shuffle: post-money €20m, new investors 20%. If a 10% pool is created from pre-money, the effective pre-money for existing holders is lower; founders take the pool dilution. Always ask “pre-money on what share count?”
Founders hear status. Funds hear percent owned and the implied cap on the last convertible note. Later private equity buyers will not pay the last pre-money as a control price without their own business valuation.
Comparing two companies’ pre-moneys without share count, prefs, or cash. Treating a SAFE cap as a pre-money. Announcing pre-money as “the company is worth.”
Pre-money ignores debt unless you convert the conversation to enterprise value. It also ignores preference waterfalls.
Use pre-money as a round mechanic. Use a structured valuation of the operating business when you are selling control or raising growth equity against earnings. Do not mix the two sentences in the same IC memo.