Pre-Money Valuation

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Pre-Money Valuation

The value of a company just before its most recent round of financing. Related: Post-Money Valuation
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Pre-Money Valuation

In venture capital, an estimate of the value of a privately held company before its IPO. Venture capitalists use the pre-money valuation to help determine how much money an IPO is likely to raise. However, the pre-money valuation is, at best, an educated guess, and there is no guarantee that the IPO will actually raise that much. It is also called simply pre-money.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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Despite the active IPO market (a total of 79 when biopharmaceutical companies are factored into the equation), both pre-money valuations and dollars raised at public offerings declined in 2014, the SVB report said.
The revenue generation required for commercial-stage device IPOs bolstered pre-money valuations, which exceeded those for biopharma in 2013 and 2014.
The median pre-money valuations in biopharma fell nearly 40 percent from 2012, to $129 million, and dollars raised remained flat.
using IPOs to exit are typically more advanced than those exiting through M&A, and they usually experience higher pre-money valuations. The median amount raised prior to IPO was $78.4 million and the median time to exit was 7.4 years, figures that far exceeded the $16.7 million and 5.1 years for M&A exits.
Finally, the authors show that equal splitting is associated with lower pre-money valuations in first financing rounds.
From the information we have concerning investment transactions within the last six months in the social networking space, we have found a range of 5 to 7 for EBITDA multiples used to determine pre-money valuations. Financial metrics for FantasyNet and a sample of companies comparable to FantasyNet are shown below in Exhibits C through G.
To determine the share price and CRV's equity stake in FantasyNet, she used a pre-money valuation of $16.830 million and a post-money valuation of $24.830 million.
Although there was plenty of price competition with out-of-region investors for attractive in-region start-ups, the pre-money valuations of most companies were fairly reasonable.

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