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Financial Empowerment

Pre-Money and Post-Money Valuation


A “pre-money” valuation is the value of a company before a new financing. A “post-money” valuation is the new value of a company after the infusion of cash from a new financing.

Entrepreneurs and investors spend a lot of time negotiating a company’s pre-money valuation. If entrepreneurs price a company’s pre-money valuation too high, then investors walk away. If investors insist on too low of a pre-money valuation, then entrepreneurs can walk away…provided they have other financing options available to them.

The Start on Purpose approach to equity fundraising favors reducing reliance on any single investor or investment group by soliciting many other sources of capital long before a company is nearly out of cash.

Next:
What’s a Good Return on Investment (“ROI”) For Business Owners? Calculating Debt-to-Equity Ratio
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