Pre-money Valuation

The agreed value of a company before a new investment round is added. It determines how much of the company investors receive for their capital.

Pre-money valuation is the single most negotiated number in a funding round. A higher pre-money means less dilution for founders. But an inflated pre-money makes the next round harder if growth does not justify it.

Investors agree to a £2M pre-money valuation and invest £500,000. Post-money valuation equals £2.5M. The investors own 20% (£500k divided by £2.5M). If you had negotiated £3M pre-money, investors would own only 14.3%.