Raise Millions by Hustle Fund VC Page 29 Pre-money and post-money valuation The pre-money valuation is the valuation of the business before it receives any outside investment. The pre-money valuation doesn’t take into consideration the money the founder is planning to raise. So if a startup has a pre-money valuation of $2M, and she’s planning to raise an additional $500K, her pre-money valuation is still just $2M. This number is important because it tells investors how much they’ll need to put in to purchase their desired equity stake. The pre-money valuation will usually change every time the startup raises a new round of financing. For instance, a seed-stage startup might raise at a $5M pre-money valuation. After 12-18 months of growth, it’ll return to raise its Series A at a $10M pre-money valuation. The increase in pre-money valuation would represent the additional value the startup has created by acquiring more customers, improving its product, building its brand, etc. Let’s take the example of the company with a pre-money valuation of $2M. If an investor wants to purchase a 20% equity stake, it means that the investor will need to put in $500k at a $2.5M post-money valuation. ($500k / $2.5M = 20%). As the name suggests, the post-money valuation is the startup’s valuation after receiving outside investment. Unlike the pre-money valuation, the post-money valuation is easy to determine: simply add the investment amount to the pre-money valuation. hustlefund.vc / @hustlefundvc